Convertibles primary prices $2.3 billion; Vonage, Zynga expand; Dominion notes flat

By Abigail W. Adams

Portland, Me., June 12 – The convertibles secondary space saw $2.3 billion in new paper flood the market on Wednesday, kickstarting trading activity that had previously been described as “anemic.”

Vonage Holdings Corp. priced $300 million of 1.75% convertible senior notes due 2024, Zynga Inc. priced $600 million of five-year convertible notes, and Dominion Energy Inc. priced an upsized $1.4 billion, or 14 million unit, offering of par of $100 equity units.

The new paper was in focus in the secondary space with the convertible bonds accounting for more than half of the $442 million in reported volume by the mid-afternoon.

Despite a down day for equities, the new paper was performing well with Vonage’s and Zynga’s convertible notes seeing a moderate dollar-neutral expansion.

While Dominion Energy’s equity units saw a large expansion early in the session, it eroded into the afternoon with the notes largely flat on a dollar-neutral basis.

Vonage at the mids

Vonage Holdings priced $300 million of five-year convertible notes after the market close on Tuesday at the midpoint of talk with a coupon of 1.75% and an initial conversion premium of 42.5%.

Price talk was for a coupon of 1.5% to 2% and an initial conversion premium of 40% to 45%.

The new notes were wrapped around par with stock down for the majority of the session, sources said.

They were expanded 0.75 point to 1 point on a dollar-neutral, or hedged, basis early in the session, according to a market source.

Another source saw them expanded about 0.5 point dollar-neutral in the mid-afternoon.

The 1.75% notes saw almost half their total issue size in play on their market debut with $150 million in estimated volume about one hour after the opening bell, a market source said.

Vonage stock closed Wednesday at $11.49, a decrease of 2.05%.

Zynga expands

Zynga priced $600 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 0.25% and an initial conversion premium of 32.5%.

Pricing came at the rich end of talk for a coupon of 0.25% to 0.75% and at the midpoint of talk for an initial conversion premium of 30% to 35%, according to a market source.

The notes were also largely wrapped around par with stock down, sources said.

They were expanded about 0.5 point dollar-neutral early in the session and 0.625 point dollar-neutral in the afternoon, sources said.

The notes saw more than half their total issue size in play with $300 million in estimated volume about one hour into Wednesday’s session.

There was a large amount of swap trading activity, a market source said.

Zynga stock closed Wednesday at $6.19, a decrease of 1.28%.

Dominion flat

While Vonage’s and Zynga’s convertible notes were largely flat outright and expanded on swap, Dominion Energy’s equity units traded up on an outright basis but were largely flat dollar-neutral.

Dominion priced an upsized $1.4 billion, or 14 million unit, offering of par of $100 equity units prior to the market open on Wednesday with a dividend of 7.25% and a threshold appreciation premium of 20%.

Pricing came at the rich end of price talk for a dividend of 7.25% to 7.75% and at the midpoint of talk for a threshold appreciation premium of 17.5% to 22.5%.

The greenshoe was also upsized to $210 million. The initial size of the deal was $1.25 billion and a greenshoe of $187.5 million.

The investment-grade paper was in demand during bookbuilding with the yield attractive, sources said.

The units were seen at 100.9 bid, 101.10 offered versus a stock price of $74.75 early in the session, a market source said.

They were wrapped around 101 in the afternoon.

While the units were expanded about 1 point dollar-neutral early in the session, they came in as stock rallied and were flat in the afternoon, a market source said.

The units also saw high-volume activity with 12 million units in play by the mid-afternoon.

Dominion stock traded to a low of $74.15 before closing the day at $75.08, an increase of 1.58%.

Mentioned in this article:

Dominion Energy Inc. NYSE: D

Vonage Holdings Corp. NYSE: VG

Zynga Inc. Nasdaq: ZNGA

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