Morning Commentary: Allscripts convertibles offering on tap, viewed as 1.5 points cheap

By Abigail W. Adams

Portland, Me., Dec. 4 – The convertibles primary market has logged another record-setting year with $56 billion in new issuance year to date, compared to $50 billion at this time last year.

While only a few weeks remain until year’s end, the new deal activity continues.

Allscripts Healthcare Solutions, Inc. plans to price $200 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be in the market with assumptions of a credit spread of 325 basis points over Libor and a 34% vol., according to a market source.

Using those assumptions, one source pegged the deal 1.5 points cheap at the midpoint of talk.

The borrow on the company’s stock is decent, the source said.

Some saw the credit spread even tighter at 300 bps over Libor. However, the company’s credit facility is 375 bps over Libor.

Allscripts is a repeat issuer of convertible notes. The health care technology company currently has $345 million outstanding in 1.25% convertible notes due July 2020.

Those notes are trading at 99.5, another source said.

While the 1.25% notes mature in less than one year, proceeds will be used to repay the outstanding borrowings under the company’s senior revolving credit facility.

“There’s no point in taking out a 1.25% piece of paper early if you can take out straight debt,” a source said.

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