Morning Commentary: Etsy’s $1 billion offering of convertible notes focus of primary market

By Abigail W. Adams

Portland, Me., June 8 – The convertibles primary market returned to action with one large offering set to price after the market close on Tuesday.

Etsy Inc. plans to price $1 billion of seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 42.5% to 47.5%, according to a market source.

The deal was heard to be in the market with assumptions of 250 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 1.125 points cheap at the midpoint of talk.

While price talk was suited to the current market, some sources were still skeptical of the offering.

The deal was coming as a “happy meal” with proceeds to be used to repurchase up to $150 million in common stock concurrently with the offering.

Remaining proceeds will be used to repurchase additional stock according to the company’s stock repurchase program.

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