Morning Commentary: Convertibles primary open; Five9, Progress Software, NextEra on tap

By Abigail W. Adams

Portland, Me., Feb. 27 – The convertibles primary market continued to unleash offerings on Tuesday with three deals totaling $1.85 billion set to price after the market close.

Five9 Inc. is on deck with a $600 million offering of five-year convertible notes, Progress Software Corp. with a $350 million offering of six-year convertible notes and NextEra Energy Capital Holdings Inc. with a $900 million offering of three-year exchangeable notes (expected Baa1/BBB+/A-).

“The pipeline is open,” a source said.

The deals looked cheap based on underwriters’ assumptions and were expected to do well with the credits solid and demand for new paper strong.

Meanwhile, the secondary space remained active early Tuesday on a mixed open for equities.

The Dow Jones industrial average was down 148 points, or 0.38%, the S&P 500 index was up 0.02%, the Nasdaq Composite index was up 0.27% and the Russell 2000 index was up 1.17% shortly before 11 a.m. ET.

There was $95 million in reported volume about one hour into the session with the issues to price the previous week continuing to drive trading activity.

Five9 refinances

Five9 plans to price $600 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 300 bps over SOFR and a 40% vol.

Using those assumptions the deal looked about 2.8 points cheap at the midpoint of talk, a source said.

The offering is coming as a refinancing with proceeds to be used to fund the repurchase of a portion of the company’s 0.5% convertible notes due 2025.

Progress Software eyed

Progress Software plans to sell $350 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 25% to 30%

The deal was heard to be in the market with assumptions of 325 bps over SOFR and a 25% vol.

Using those assumptions, the deal looked about 2.625 points cheap at the midpoint of talk, a source said.

The deal is also a refinancing with the company tapping the convertibles market to repay the outstanding amounts under its term loan.

Progress Software’s 1% convertible notes due 2026 were lower alongside stock on the heels of the new offering.

The notes fell about 2 points outright with stock off 4%.

The notes were trading around 104.375 early in the session.

Progress Software’s stock was trading at $54.34, a decrease of 3.09%, shortly before 11 a.m. ET.

NextEra on deck

NextEra plans to price $900 million of three-year exchangeable notes (expected Baa1/BBB+/A-) after the market close on Tuesday with price talk for a coupon of 2.75% to 3.25% and an initial exchange premium of 22.5% to 27.5%.

The deal was heard to be in the market with assumptions of 85 bps over SOFR and a 25% vol.

Using those assumptions, the deal looked 1.625 points cheap at the midpoint of talk, a source said.

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