Morning Commentary: Market awaits pricing of Hope Bancorp notes; AXA exchangeables on tap

By Abigail W. Adams

Portland, Me., May 8 – With earnings reports still pouring in, the convertible bond primary market has been active early in the week with two new deals totaling $950 million set to price in the next two days.

Both deals come from the financial sector, marking a shift away from the tech heavy “high vol., low coupon” new deals of the first quarter, a market source said.

Hope Bancorp Inc. plans to price $200 million of 20-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 22.5% to 27.5%.

In connection with the offering, Hope Bancorp will repurchase up to $100 million of common stock.

With a credit spread of 175 basis points and a 25.5% vol., the deal models to just above par, a market source said. “It’s another fair value,” the source said.

While the convertible notes are non-rated, Hope Bancorp “is as close to investment grade as its going to get,” the source said.

However, the yield on the common stock is 3%, which is far greater than the yield talk for the convertible bond.

The deal will most likely attract REIT investors who want to be in the name, but it is not expected to trade heavily. “A lot of the hedge guys aren’t going to play this, especially with the upside-down coupon,” the source said.

AXA SA plans to price $750 million of three-year bonds mandatorily exchangeable for AXA Equitable Holdings, Inc. on Wednesday alongside AXA Equitable Holdings’ IPO.

Price talk is for a coupon of 6.75% to 7.25% and an initial exchange premium of 17.5% to 22.5%.

The deal was launched on April 26. AXA Equitable is targeting a $3.5 billion IPO, which would make it the largest IPO since Alibaba Group Holding Ltd.

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