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Morning Commentary: Primary to price $1.25 billion of new convertibles; FireEye, NRG on tap
By Abigail W. Adams
Portland, Me., May 21 – The primary market stands poised for another active week with $1.25 billion in two deals expected to price after the market close on Monday.
FireEye Inc. plans to price $525 million of six-year convertible notes after the market close on Monday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 35% to 40%, according to a market source.
The deal is being marketed with a credit spread of 250 basis points over Libor and a 38% vol., a market source said.
The deal comes with a call spread. In addition to covering the cost of the call spread, proceeds will be used to repurchase a portion of the Milpitas, Calif.-based cybersecurity company’s 1% convertible notes due 2035.
FireEye is a repeat issuer of convertible notes with $460 million outstanding in 1.625% convertible notes due 2035 and $460 million outstanding in 1% convertible notes due 2035.
The 1.625% and 1% notes trade about 3 to 5 points rich, a market source said. Both notes currently have large premiums.
FireEye’s 1% convertible notes saw some trading activity early in Monday’s session with the notes trading up to 96. FireEye’s 1.625% notes traded just south of 93, according to Trace data.
NRG Energy Inc. plans to price $500 million of 30-year convertible notes after the market close on Monday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 40% to 45%, according to a market source.
The deal is being marketed with a credit spread of 275 bps over Libor and a 30% vol., according to a market source.
The deal models out to fair value, a market source said. NRG common stock carries a yield of 37 cents, which the larger coupon is compensating for, a source said.
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