Morning Commentary: YY convertible notes hit the secondary market, expand on debut

By Abigail W. Adams

Portland, Me., June 20 – More new paper hit the convertibles secondary space on Thursday as markets extended their rally in the wake of the Federal Reserve’s meeting.

YY Inc. priced its $850 million two-tranche offering of convertible notes prior to the market open with both tranches pricing at the cheap end of talk.

The company priced a $425 million tranche of six-year convertible notes at par with a coupon of 0.75% and an initial conversion premium of 35%.

Price talk was for a coupon of 0.25% to 0.75% and an initial conversion premium of 35% to 40%.

The company also priced a $425 million tranche of seven-year convertible notes at par with a coupon of 1.375% and an initial conversion premium of 35%.

Price talk was for a coupon of 0.875% to 1.375% and an initial conversion premium of 35% to 40%.

The new notes from the Guangzhou, China-based global social media platform were in focus in the secondary space.

They accounted for more than $112 million of the total $183 million in reported volume on the tape about one hour into the session.

The 1.375% convertible notes due 2026 were changing hands around 102 with stock up about 0.5%, a market source said.

The 0.75% convertible notes due 2025 were changing hands around 101.875.

They were expanded on a dollar-neutral, or hedged, basis, a source said.

YY stock traded as high as $72.45 shortly after the opening bell but came in and was $71.82, an increase of 1.1%, shortly before 11 a.m. ET.

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