Morning Commentary: Tyler convertibles restructured, skyrocket in secondary; AES flat

By Abigail W. Adams

Portland, Me., March 5 – The convertibles primary market capped a record-setting week for new deal activity with another $1.65 billion pricing on Thursday over three deals.

However, the carnage on the new deal front took its toll on the pricing with one offering seeing a massive downsize and restructuring and pricing wider than initial talk and the other two pricing cheap.

Tyler Technologies Inc. priced a downsized $525 million offering of five-year convertible notes after the market close on Thursday.

The deal was initially marketed as a $1.6 billion two-tranche offering.

AES Corp. priced $1 billion par-of-$100 three-year equity units and Cutera Inc. sold $125 million of five-year convertible notes after the market close on Thursday.

The new paper hit the secondary space as the sell-off in the tech sector continued. However, Tyler’s new convertible notes skyrocketed on an outright basis as a result of the repricing.

Tyler downsizes

Tyler Technologies priced a downsized $525 million offering of five-year convertible notes after the market close on Thursday at par with a coupon of 0.25% and an initial conversion premium of 30%, according to a company news release.

Pricing came in line with revised talk for a coupon of 0.25% and at the cheap end of revised talk for an initial conversion premium of 30% to 32.5%, according to a market source.

Initial talk was for a fixed coupon of 0% and an initial conversion premium of 32.5% to 37.5%.

The deal was initially marketed as a $1.6 billion two-tranche offering of convertible notes, which included a five-year tranche and a seven-year tranche.

The five-year tranche was initially sized at $1 billion with a $150 million greenshoe.

The seven-year tranche was sized at $600 million and initially talked with a coupon of 0.25% to 0.75% and an initial conversion premium of 32.5% to 37.5%.

Talk widened during bookbuilding to a coupon of 1% and an initial conversion premium of 30% to 32.5%.

However, the tranche was withdrawn.

The 0.25% convertible notes skyrocketed in the secondary space as a result of the repricing, a source said.

The notes traded as high as 109 early in the session.

Tyler’s stock traded up to $405.27, an increase of 6.68%, shortly before 11 a.m. ET.

AES taps market

AES priced $1 billion par-of-$100 three-year equity units after the market close on Thursday at the cheap end of talk with a coupon of 6.875% and a threshold appreciation premium of 22.5%.

Price talk was for a yield of 6.375% to 6.875% and a threshold appreciation premium of 22.5% to 27.5%, according to a market source.

The equity units were wrapped around par early in Friday’s session.

It was marked at $99.8 bid, $100.05 offered, according to a market source.

AES’ stock was largely flat early in the session. However, it turned negative and was changing hands at $25.18, a decrease of 2.63%, shortly before 11 a.m. ET.

Cutera prices

Cutera priced $125 million of five-year convertible notes after the market close on Thursday at par with a coupon of 2.25% and an initial conversion premium of 27.5%.

The convertibles priced at the cheap end of talk, which called for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The new paper was not active in the secondary space.

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