Morning Commentary: ON Semiconductor convertibles hit the aftermarket, drop below par

By Abigail W. Adams

Portland, Me., May 12 – More new paper entered the convertibles secondary space as equities continued to struggle with the latest consumer price index data fueling concerns over inflation.

The Dow Jones industrial average was down 321 points, or 0.95%, the S&P 500 index was down 1.22% and the Nasdaq Composite was down 1.95% shortly before 11 a.m. ET as investors digested April’s CPI report, which reflected the largest jump in consumer prices since 2009.

ON Semiconductor Corp.’s new paper was in focus in the secondary space with the new paper dropping below par on debut.

ON Semiconductor priced $700 million of six-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 42.5%.

Pricing came in line with talk for a fixed coupon of 0% and at the midpoint of talk for an initial conversion premium of 40% to 45%, according to a market source.

The new paper traded in a range of 99.375 to 100.5 early in the session. The 0% notes were changing hands at 99.5 shortly before 11 a.m. ET.

ON Semiconductor’s stock traded to a low of $36.41 early in the session but was bouncing off its lows and traded up to $36.88, a decrease of 0.78%, shortly before 11 a.m. ET.

Concurrently, the company entered into privately negotiated transactions to repurchase or exchange $372.4 million in principal of its 1.625% convertible notes due 2023 for $507 million in cash and 5.4 million shares.

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