Midday Commentary: Planned HomeAway seen higher in gray market, viewed just slightly cheap

By Rebecca Melvin

New York, March 25 - Convertibles players were sizing up a new $350 million convertible note offering from HomeAway Inc. announced late Monday for pricing after the market close on Tuesday.

The five-year notes were seen in the gray market ahead of final terms being fixed at 101.25 bid, 102.75 offered, according to a market source.

But that was above the source's assessment of the deal at just slightly cheap, or worth 100.125 at the midpoint of talk, using a credit spread of 350 basis points over Libor, 35% vol. and 50 bps of stock borrow cost.

The notes were talked at a 0% to 0.5% coupon and a 27.5% to 32.5% initial conversion premium, according to a syndicate source.

HomeAway shares were bouncing around in early trade but were last down about 1%.

Back in established issues, trading was quiet, a New York-based trader said. He said the focus was mostly on HomeAway, which he said was an interesting company, and the deal size large enough that "everyone will want to pay attention to it."

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