Morning Commentary: PRA Group moves over par post-pricing; ServiceNow deal eyed as older issue dips

By Stephanie N. Rotondo

Seattle, May 23 – The convertible bond primary market was once again in focus early Tuesday as PRA Group Inc. priced its $300 million offering of six-year convertible senior notes.

The Rule 144A deal came at par to yield 3.5% with an initial conversion premium of 35%. That was smack in the middle of the 3.25% to 3.75% yield talk and the 32.5% to 37.5% premium talk.

BofA Merrill Lynch and SunTrust Robinson Humphrey Inc. ran the books.

A trader saw the new issue trading “just over 101” in early dealings. He noted that the stock (Nasdaq: PRAA) was little changed.

“It’s basically a point premium on pricing,” he said. “People thought they would do a little better than that.”

Still, he added that the issue was trading actively.

“Probably half of the issue has turned over already,” he said at mid-morning.

Meanwhile, ServiceNow Inc.’s 0% convertible notes due 2018 were trading as the market prepared for the company’s own new issue to price.

A trader said the convertible bonds “trade strictly on swap,” seeing the paper falling about 1.5 points to 140.5.

“That’s to be expected since the stock is down,” he said.

The underlying equity (NYSE: NOW) was off about 1% in early trading.

The Santa Clara, Calif.-based cloud computing company said late Monday that it was offering $750 million of five-year convertible notes due 2022. The proceeds will be used in part to redeem or repurchase the 0% convertibles.

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