Morning Commentary: Convertibles primary prices $2.3 billion; new paper trades higher

By Abigail W. Adams

Portland, Me., June 12 – The convertibles secondary space saw $2.3 billion in new paper flood the market on Wednesday, kickstarting trading activity that had previously been described as “anemic.”

Vonage Holdings Corp. priced $300 million of 1.75% convertible senior notes due 2024 on Tuesday with an initial conversion premium of 42.5%.

Pricing came in the midpoint of talk for a coupon of 1.5% to 2% and an initial conversion premium of 40% to 45%.

The new notes were wrapped around par with stock down, a market source said. They were expanded 0.75 point to 1 point on a dollar-neutral, or hedged, basis.

The 1.75% notes saw almost half their total issue size in play with $150 million in estimated volume about one hour after the opening bell.

Vonage stock was $11.50, a decrease of 1.96%, shortly before 11 a.m. ET.

Zynga Inc. priced $600 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 0.25% and an initial conversion premium of 32.5%.

Pricing came at the rich end of talk for a coupon of 0.25% to 0.75% and at the midpoint of talk for an initial conversion premium of 30% to 35%, according to a market source.

The notes were also largely wrapped around par with stock down early in the session. They were expanded about 0.5 point dollar-neutral, a market source said.

Zynga stock was $6.15, a decrease of 1.91%, shortly before 11 a.m. ET.

The notes also saw almost half their total issue size in play with $300 million in estimated volume.

More than 85% of the volume on the tape came from the two convertible bond deals, a market source said.

Dominion Energy Inc.’s equity units also saw high-volume activity with the notes trading up on their market debut.

Dominion priced an upsized $1.4 billion, or 14 million unit, offering of par of $100 equity units prior to the market open on Wednesday with a dividend of 7.25% and a threshold appreciation premium of 20%.

Pricing came at the rich end of price talk for a dividend of 7.25% to 7.75% and at the midpoint of talk for a threshold appreciation premium of 17.5% to 22.5%.

The greenshoe was also upsized to $210 million. The initial size of the deal was $1.25 billion and a greenshoe of $187.5 million.

The units were seen at 100.9 bid, 101.10 offered versus a stock price of $74.75, a market source said.

More than 1.25 million units were in play about one hour into the session.

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