Morning Commentary: DocuSign oversubscribed, expands on debut; International Flavors up

By Abigail W. Adams

Portland, Me., Sept. 14 – The primary market rounded out the week with the pricing of an upsized $500 million offering from DocuSign Inc., lifting new deal volume by dollar amount to $1.25 billion for the week.

The deal was well oversubscribed during bookbuilding with strong interest from long-only and hedge accounts, a market source said. The notes were expanding on their secondary market debut.

International Flavors & Fragrances Inc.’s newly priced 6% tangible equity units due 2021 continued to perform well in the secondary space with the notes continuing to make gains early in Friday’s session.

New deal volume is already up 40% year over year with the pace expected to continue.

There will be a steady pipeline of new deals through the final weeks of September until the earnings season blackout with another wave expected once the blackout is through, a market source said.

DocuSign oversubscribed

DocuSign priced an upsized $500 million of five-year convertible notes prior to the market open on Friday at par with a coupon of 0.5% and an initial conversion premium of 30%.

Pricing came at the rich end of talk for a coupon of 0.5% to 1% and at the cheap end of talk for an initial conversion premium of 30% to 35%.

The initial size of the deal was $400 million. The greenshoe was also upsized to $75 million from $60 million.

The book for the deal was well oversubscribed with strong interest from long-only accounts, a market source said. There was also a healthy allocation to hedge accounts.

Price talk was heard to have tightened to a coupon of 0.625% to 0.75% and an initial conversion premium of 32.5% during bookbuilding.

The deal was oversubscribed at the midpoint of talk. However, DocuSign was interested in a 0.5% cash coupon, a source said.

While a different combination, pricing at the rich end of coupon talk and the cheap end of the initial conversion premium was similar to pricing at the midpoint, the source said.

While the rate on the borrow of common stock is high, it is expected to improve.

In addition to the concurrent equity offering of 8.06 million shares, which priced at $55.00 per share, there will also be a lock-up release of 125 million shares in October, a market source said.

The new 0.5% notes were in focus in the secondary space. They were seen trading at par 1/8 bid, par ˝ offered with stock down about 1.2% early in the session.

International Flavors gains

International Flavors’ newly priced 6% tangible equity units due 2021 continued to perform well in the secondary space.

They were seen trading at $52.54, an increase of 22 cents, or 0.42%, early in Friday’s session with stock largely flat.

International Flavors priced a $750 million offering of the $50-par tangible equity units concurrently with a $1.5 billion offering of common stock after the market close on Wednesday.

The notes traded up more than $2 and were expanded about 0.75 point dollar-neutral on their market debut.

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