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Morning Commentary: Market eyes Rapid7, NII Holdings
By Abigail W. Adams
Portland, Me., Aug. 8 – After seeing its busiest months in recent history in May and June, the convertibles primary market has slowed in August but it has not stopped.
Rapid7, Inc. plans to price $175 million of five-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 is being marketed with a credit spread of 325 basis points over Libor and a 37% vol., a source said. With those assumptions the deal models about 0.20 point cheap at the midpoint of talk, a market source said.
Another source pegged the deal 1.5 points cheap.
NII Holdings Inc. plans to price $75 million of five-year convertible notes with a coupon of 3.75% to 4.25% and an initial conversion premium of 17.5% to 22.5%, according to a market source.
One source pegged assumptions as a credit spread of 1,300 bps over Libor and 45% vol.
As a telecommunications holding company and with proceeds to be used to help the cash flow of Nextel Brazil, the wide credit spread is called for, a market source said.
The company also has a small market cap at $516 million.
NII’s vol. “is through the roof,” a market source said. It is probably more like 75% but vol. is usually capped at 45%, the source said.
The company’s stock hit a 52-week low in December of 22 cents. Pricing of the notes comes a little more than one week after the company hit its 52-week high of $7.29.
The convertible notes offering also comes as NII Holdings confirmed on its earnings conference call that it is in the process of selling its Brazil unit.
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