Morning Commentary: Fortive’s new convertible notes hits the market, expand on debut

By Abigail W. Adams

Portland, Me., Feb. 20 – The largest convertible deal of the year hit the secondary space on Wednesday and dominated trading activity.

Fortive Corp. priced $1.25 billion of three-year convertible notes after the market close on Tuesday at the rich end of talk at par with a coupon of 0.875% and an initial conversion premium of 32.5%, according to a company news release.

Price talk was for a coupon of 0.875% to 1.375% and an initial conversion premium of 27.5% to 32.5%, according to a market source

Despite pricing at the rich end of talk, the 0.875% convertible notes due 2022 saw a large dollar-neutral expansion right out the gate.

The notes traded up to 104 with stock up slightly about one hour into Wednesday’s session.

Stock was $81.50, an increase of 1.27%, shortly before 11 a.m. ET.

On a valuation basis, the deal “was nothing exciting,” a market source said. “This is all about it being IG.”

S&P Global Ratings rated the convertible notes BBB- and affirmed Fortive’s issuer credit rating as BBB.

The new paper dominated activity in the secondary space, accounting for $110 million of the $140 million in total trading volume about one hour into Wednesday’s session.

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