Akamai convertibles on tap; Workiva upsizes, tightens talk; Envista gains; Shockwave up

By Abigail W. Adams

Portland, Me., Aug. 14 – The convertibles primary market launched what promises to be another active week with two deals totaling $1.625 billion on deck.

Akamai Technologies Inc. plans to price $1 billion of long five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.125% to 1.625% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and BofA Securities Inc. are bookrunners for the Rule 144A offering, which carries a greenshoe of $150 million.

Workiva Inc. plans to sell an upsized $625 million offering of five-year convertible notes after the market close on Monday.

While some sources felt the pricing was tight, the deal played to strong demand with the deal upsizing and talk tightening.

While market players eyed Workiva’s new offering, the secondary space was quiet on a mixed start to the week for equity markets.

The Dow Jones industrial average closed Monday up 26 points, or 0.07%, the S&P 500 index closed up 0.58%, the Nasdaq Composite index closed up 1.05% and the Russell 2000 index closed down 0.33%.

There was $43 million of convertibles trading on the tape about one hour into the session and $333 million on the tape less than one hour before the market close.

Several deals that priced the previous week remained active.

Envista Holdings Corp.’s 1.75% convertible notes due 2028 (Baa3) improved in active trade although the new notes remained below par.

Shockwave Medical Inc.’s new 1% convertible notes due 2028 continued to add to their outright gains after a strong aftermarket debut the previous session although the notes were largely moving in line dollar-neutral.

Hannon Armstrong Sustainable Infrastructure Capital Inc.’s 3.75% exchangeable notes due 2028 (Baa3) were lower outright although the notes were also largely unchanged dollar-neutral.

Workiva in demand

Workiva’s offering of five-year convertible notes played to strong demand during book building despite what some felt was tight pricing.

Workiva plans to price an upsized $625 million, from $525 million, of five-year convertible notes after the market close on Monday with tightened talk for a coupon of 1% to 1.25% and a fixed conversion premium of 30%.

Initial price talk was for a coupon of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 275 basis points over SOFR and a 37% vol.

Several sources felt the terms were aggressive.

“These software companies are getting pretty tight,” a source said of the credit spread.

“They’re pushing the terms a bit,” another source said.

Using the underwriter’s assumptions, the deal looked about 1 point cheap at the midpoint of initial talk.

Tightened talk further reduced the cheapness of the deal, which looked fair value to 0.375 point cheap at the midpoint of revised talk, a source said.

However, as with most refinancing deals, the real value will be in Workiva’s buyback of its outstanding notes.

Workiva will enter into privately negotiated transactions with holders of its 1.125% notes due 2026 to repurchase a portion of the outstanding amount for cash.

The 1.125% notes are in-the-money and trading about 17 points above parity with some round-lot trades at 141.25 early in the session, a source said.

While the company is raising enough cash to take out the full outstanding amount, absent a tender offer, they are only permitted to repurchase 80% of the outstanding amount, or about $270 million, a source said.

While outstanding holders stand to gain the most from the new offering, the deal still played to strong demand from new accounts with balanced convertible paper in demand.

Recent deals

It was a quiet day in the convertibles secondary space on Monday although several of the deals to price in the flood of issuance the previous week remained active.

Envista’s 1.75% convertible notes due 2028 improved in active trade although the notes remained below par.

The notes gained about 0.5 point outright with stock roughly flat in the late afternoon.

They were trading just north of 99 versus a stock price of $33.42, according to a market source.

There was $17 million in reported volume.

Envista’s stock traded to a low of $32.82 and a high of $33.57 before closing at $33.28, off 0.36%.

The 1.75% notes played to strong demand during book building and made solid gains on their aftermarket debut on Aug. 8.

However, the notes fell below par their second day in the secondary space and closed the previous week on a 98-handle.

Shockwave Medical’s 1% convertible notes due 2028 continued to add to their outright gains after a strong aftermarket debut last Friday.

However, the notes were largely moving in line dollar-neutral.

The 1% notes were changing hands at 102.125 versus a stock price of $23.37 in the late afternoon.

There was $11 million in reported volume.

Shockwave Medical’s stock traded to a low of $222.78 and a high of $231.08 before closing at $229.84, an increase of 2.03%.

The notes expanded about 3 points dollar-neutral last Friday.

Hannon Armstrong’s 3.75% exchangeable notes due 2028 were lower alongside stock although the notes were largely unchanged dollar-neutral.

The 3.75% exchangeable notes were changing hands at 102.125 versus a stock price of $23.37 in the late afternoon.

There was $14 million in reported volume.

Hannon Armstrong’s stock traded to a low of $22.64 and a high of $23.61 before closing at $23.12, a decrease of 2.20%.

Hannon Armstrong’s 3.75% exchangeables were weak on debut and spent their initial day in the aftermarket below par.

However, they improved as the week progressed and closed last Friday with strong outright and dollar-neutral gains.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Envista Holdings Corp. NYSE: NVST

Hannon Armstrong Sustainable Infrastructure Capital Inc. NYSE: HASI

Shockwave Medical Inc. Nasdaq: SWAV

Workiva Inc. NYSE: WK

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