Morning Commentary: Market eyes planned Proofpoint convertible; Western Asset prices

By Rebecca Melvin

New York, Aug. 20 – Convertible players were evaluating the cheapness of Proofpoint Inc.’s newly announced offering of $750 million of five-year convertible bonds early Tuesday.

The Rule 144A offering has a $112.5 million greenshoe.

One source said the valuation came to about 101.87 at the midpoint of price talk using a credit spread of 250 basis points over Libor and 36% vol.

The new deal was said to be pricing via joint bookrunners Morgan Stanley & Co. LLC and BofA Securities Inc. But that information had not yet been confirmed.

The notes are non-callable until Aug. 20, 2022 and then provisionally callable at 100% if shares rise to 130% of the conversion price for 20 out of 30 consecutive trading days. It is also coming with capped call transactions.

Proofpoint, the Sunnyvale, Calif.-based security-as-a-service vendor, has an existing convertible in the market. The company’s shares tanked in early trading by 4.5% after the convertible offering was announced.

Also on Tuesday, Western Asset Mortgage Capital Corp., the Pasadena, Calif.-based real estate investment trust, announced that it priced $40 million of 6.75% convertibles due 2022 at par in a reopening of an existing $115 million of notes priced in October. 2017. The new notes, which were sold with an initial conversion premium of 24%, will form one series with the existing notes for a new deal size of $155 million.

JMP Securities was the bookrunner for the deal that was made under an effective registration statement filed by the company with the Securities and Exchange Commission.

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