Integer convertible notes offering ‘hot’; Ford notes improve; Etsy active

By Abigail W. Adams

Portland, Me., Jan. 31 – The convertibles primary market has one last deal up its sleeve before closing the books on January – Integer Holdings Corp.’s $375 million offering of five-year convertible notes, which is slated to price after the market close.

The deal was “hot,” a source said, with demand heavy in a market hungry for new paper.

While Integer’s offering lifted the tally, January 2023 still marks the lowest volume January for new deal activity by face amount and number of transactions since January 2016.

However, Integer’s offering marked what many hope will be the start of a growing trend – high-yield issuers turning to the convertibles market to meet their refinancing needs.

Meanwhile, trading activity remained muted in the secondary space as equities rallied on the eve of the Federal Open Market Committee’s Wednesday rate hike decision.

The Dow Jones industrial average closed Tuesday up 369 points, or 1.09%, the S&P 500 index closed up 1.46%, the Nasdaq Composite index closed up 1.67% and the Russell 2000 index closed up 2.22%.

The Employment Cost Index report, which reported a slowdown in wage growth, was helping to lift investor sentiment ahead of the Federal Reserve’s widely expected 25 basis point rate increase with the market now expecting an end to the rate hike campaign in May.

There was about $70 million in reported volume one hour into the session and $422 million on the tape about one hour before the market close.

Ford Motor Co.’s 0% convertible notes due 2026 were on the rise in heavy volume as stock gained after industry competitor General Motors posted a surprise earnings beat.

Etsy Inc.’s 0.125% convertible notes due 2026 were also active with the notes higher alongside stock.

Integer eyed

Integer plans to price $375 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.125% to 2.625% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of a 375 bps credit spread and a 35% vol., according to a market source.

Using those assumptions, the deal looked 3.8 points cheap at the midpoint of talk.

The deal was shaping up to be a blowout with the offering 5x oversubscribed, a source said.

Integer was at one time a serial issuer of convertible notes under its former name Greatbatch.

However, the company has opted for straight debt over the past two decades.

Proceeds from the offering will be used to refinance the company’s term B loan.

Integer’s return to the convertibles market to refinance its straight debt is what many hope will be the start of a growing trend of high-yield issuers tapping the convertibles market for their refinancing needs.

Ford lifted

Ford’s 0% convertible notes due 2026 were lifted in heavy volume on Tuesday with stock on the rise after industry peer General Motors posted a surprise earnings beat.

The 0% convertible notes gained 1.5 points outright with stock up more than 4%.

The 0% notes rose to a 101-handle and were wrapped around 101.5 in the early afternoon, according to a market source.

There was $14 million in reported volume with the notes among the most active of Tuesday’s session.

Ford’s stock traded to a high of $13.57 and a low of $13.25 before closing the day at $13.51, an increase of 4.81%.

Ford is scheduled to report earnings on Thursday.

Etsy active

Etsy’s 0.125% convertible notes due 2026 were active with the notes higher alongside stock.

The in-the-money convertible notes rose about 1 point outright with stock up about 2%.

The notes traded up to 173 in the early afternoon.

There was $12 million in reported volume.

Etsy’s stock traded to a high of $139.08 and a low of $135.60 before closing the day at $137.58, an increase of 2.14%.

Mentioned in this article:

Etsy Inc. Nasdaq: ETSY

Ford Motor Co. NYSE: F

Integer Holdings Corp. NYSE: ITGR

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