Morning Commentary: Enphase Energy prices; market eyes New Mountain, FTI Consulting

By Abigail W. Adams

Portland, Me., Aug. 15 – The convertible primary market saw a burst of activity on Wednesday with one small deal pricing before the market open and two more set to price after the market close.

In an overnight deal, Enphase Energy Inc. priced $60 million of five-year convertible notes prior to the market open with a coupon of 4% and an initial conversion premium of 10%.

Credit Suisse Securities (USA) LLC was the bookrunner for the Rule 144A deal.

Board of directors member and stockholder Thurman John Rodgers purchased $5 million of the convertible notes in a concurrent private placement.

The energy technology company specializing in solar power has a small market cap of about $520.58 million. The small deals from small market cap companies “tend to fly under the radar,” a market source said.

While the deal looked “stupid cheap,” it was not expected to trade much, another source said. The notes were not seen on the tape early in the session.

FTI Consulting Inc. plans to price $250 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 30% to 35%, according to a market source.

The deal is being marketed with a credit spread of 250 basis points over Libor and a 29% vol., according to a market source.

The deal looked to be about 1.75 points cheap at the midpoint of talk, a market source said.

FTI Consulting is a repeat issuer of convertible notes. The global business advisory firm intends to use proceeds to redeem the outstanding $300 million of its 6% convertible notes due 2022.

The notes changed hands at 102.297 on Tuesday, according to Trace data.

New Mountain Finance Corp. plans to price $100 million of five-year convertible notes after the market close on Wednesday with a coupon of 5.5% to 5.75% and a fixed initial conversion premium of 10%.

Using a credit spread of 275 bps over Libor and a 13% vol., the deal looked to be about 1 point to 1.5 points cheap at the midpoint of talk, a market source said.

The deal from the business development company will appeal to the group of investors that play BDCs.

However, convertible paper from the financial sector does not have mass appeal, a market source said. While the deal is expected to do well, “it’s not a screamer,” a market source said.

The company has no vol. and there’s a high yield on the common, the source said.

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