Morning Commentary: BofA Voya-linked notes down in gray market; Pure Storage stays strong

By Abigail W. Adams

Portland, Me., April 6 – The most recent cash-settled equity-linked notes tied to Voya Financial Inc. stock hit the market on Friday but were not seen trading early in the session, a market source said.

BofA Finance LLC priced $250 million in five-year cash-settled equity-linked notes tied to Voya after the market close on Thursday with a coupon of 0.25% and an initial threshold premium of 37.5%.

Pricing came at the cheap end of talk for a coupon of 0% to 0.25% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

The initial threshold price will be determined after a five-day averaging period for Voya stock, which began Friday.

The 0.25% notes were seen at 99 5/8 bid, 99 7/8 offer prior to the market open but were not seen trading, a market source said. The notes have a low delta, a market source said.

BofA is the third financial institution to price cash-settled equity-linked notes tied to Voya. Banks are monetizing the warrants that were distributed after ING Group’s divestment of the company, market sources said.

JPMorgan Chase Financial Co. LLC priced $350 million of five-year cash-settled equity-linked notes tied to Voya on Jan. 31 with a coupon of 0.25% and an initial conversion premium of 32.5%.

Deutsche Bank AG, London Branch priced $300 million of cash-settled equity-linked notes tied to Voya on March 8 with a coupon of 1% and an initial conversion premium of 30%.

Pure Storage’s new 0.125% notes due 2023 remained strong in the secondary market after expanding 1½ points dollar-neutral on their market debut Thursday.

The deal from the Mountain View, Calif.-based flash data storage company was the latest example of a successful software deal, a market source said.

Pure Storage priced an upsized $500 million in five-year convertible notes prior to the market open Thursday with a coupon of 0.125% and an initial conversion premium of 32.5%.

Pricing came at the midpoint of talk for a coupon of 0% to 0.25% and at the cheap end of talk for an initial conversion premium of 32.5% to 37.5%, according to a market source.

While some market sources saw the pricing as aggressive, underwriters put out the overnight deal with talk that would lead the notes to break at par in the market when trading began. The deal cleared with a 0.125% coupon with multiple oversubscriptions, a market source said.

There has been high demand for many of the recent software deals that have priced with most deals heavily oversubscribed during the bookbuilding.

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