Morning Commentary: New Macquarie convertible issue pops post-pricing; Intel also busy

By Stephanie N. Rotondo

Seattle, Oct. 7 – Macquarie Infrastructure Corp.’s $350 million issue of 2% convertible notes due 2023 was taking up the bulk of the trading in the convertible bond market early Friday.

According to one New York-based trader, total trading volume in the convertibles space was about $286 million. Of that, $167 million was Macquarie.

The trader said the new issue was trading outright in a 100.5 to 101.5 range.

He noted that with a 5.66% yield on the common stock, the bonds were trading at a negative yield to the equity by “almost 400 basis points.”

“But it’s debt and it [currently] has a floor and people like that,” he said.

The deal came upsized from $325 million and with an initial conversion premium of 35%.

Price talk was for a yield of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%.

J.P. Morgan Securities LLC, Barclays, BBVA Securities Inc., Regions Securities LLC and Wells Fargo Securities LLC ran the books.

Away from Macquarie, the other big trader of the day was Intel Corp.’s 2.95% junior subordinated convertible notes due 2035.

A trader pegged the paper at 137.75 versus a stock price of $38.03 at mid-morning. He noted that about $37 million of the bonds had changed hands.

“So over 70% of the volume is in these two issues,” he said. He added that he was not all that surprised that the new deal was topping the charts.

“There is so much demand and supply just doesn’t come out,” he said.

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