Morning Commentary: Ormat convertible notes hit the aftermarket, gain on trading debut

By Abigail W. Adams

Portland, Me., June 23 – The first new paper of the week hit the convertibles secondary space on Thursday as equity markets firmed.

Ormat Technologies Inc. priced an upsized $375 million of five-year green convertible notes after the market close on Wednesday at par with a coupon of 2.5% and an initial conversion premium of 30%.

Pricing came at the midpoint of talk for a coupon of 2.25% to 2.75% and at the cheap end of talk for an initial conversion premium of 30% to 35%, according to a market source.

The deal came as a happy meal with $18 million of net proceeds used to repurchase stock at a purchase price of $69.44 in privately negotiated transactions.

The new paper dominated activity in the space and was making gains on debut.

The 2.5% notes traded as high as 101.375 after the opening bell but came in to trade on a par handle.

The notes were changing hands in the 100.375 to 100.875 context on an outright basis.

However, the majority of trades on the tape were swap trades.

The notes were seen up about 0.5 point dollar-neutral.

“They priced this thing correctly,” a source said.

Ormat’s stock was seen at $69.78, an increase of 0.53%, shortly before 11 a.m. ET.

Outside of Ormat the secondary space was quiet.

While equity markets were mixed at the start of the session, indexes were in the green as the session progressed.

The Dow Jones industrial average was up 146 points, or 0.48%, the S&P 500 index was up 0.72%, the Nasdaq Composite index was up 1.18% and the Russell 2000 index was up 0.62% shortly before 11 a.m. ET.

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