Morning Commentary: Two convertibles deals launch; Unisys deal is 100.25 bid; CSG looks cheap

By Rebecca Melvin

New York, March 9 – Two new deals were being sized up in the convertibles market early Wednesday, and although they were smallish offerings, they were significant in that the U.S. primary market has only had about $1 billion in new issuance in five deals since the beginning of the year.

Initial interest from the demand side was mild however.

Unisys Corp.’s planned $150 million offering of five-year convertible senior notes was bid in the gray market at only 100.25 ahead of final terms expected to be fixed after the market close, a New York-based trader said.

Unisys shares slumped on the heels of the convertible deal launch, with the stock down $2.38, or 22%, to $8.65 at late morning.

The Unisys notes were talked to yield 5% to 5.5% with an initial conversion premium of 20% to 25%.

CSG Systems International Inc. also dipped its toe into the recently lifeless convertibles primary market. The CSG deal for $200 million of 20-year convertibles was seen 3.75% cheap, according to a New York-based trader.

That’s “good on the surface, but it’s a small deal and average daily volume of the stock is also small, so the bonds will be illiquid and tough to trade,” the trader said.

The CSG Systems notes were talked at a 4.125% to 4.5% coupon and a 40% to 42.5% initial conversion premium and are expected to price late Wednesday. Shares of the Englewood, Colo.-based business services company were up more than 6% on the heels of the launch.

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