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Morning Commentary: Herbalife, Apptio bring $675 million of new paper to convertibles market
By Abigail W. Adams
Portland, Me., March 21 – Wednesday began with $675 million in new convertibles paper hitting the secondary market. However, trading volume remained light as another nor’easter pummels Wall Street.
In an overnight deal, Herbalife Ltd. priced an upsized $550 million of six-year convertible notes with a coupon of 2.625% and an initial conversion premium of 30% prior to the market open on Wednesday.
Pricing came at the mid-point of talk for a coupon of 2.375% to 2.875% and an initial conversion premium of 27.5% to 32.5%, according to a market source. The initial size of the deal was $500 million.
The new 2.625% convertible notes due 2024 were seen trading at 101.5 to 102 early in the session. “They really haven’t expanded,” a market source said. “Stock is up handsomely.”
Herbalife stock was up to $99, an increase of 3%, early in Wednesday’s session.
While Herbalife’s deal was more than four times the offering from Apptio Inc., new paper from Apptio was far more active on the tape early in Wednesday’s session.
Apptio priced $125 million of five-year convertible notes after the market close Tuesday with a coupon of 0.875% and an initial conversion premium of 30%.
Pricing came at the rich end of talk for a coupon of 0.875% to 1.375% and at the mid-point of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.
The new 0.875% notes due 2025 expanded 1 point on a dollar-neutral basis out of the gate and was the top volume mover early in Wednesday’s session, a market source said. Apptio accounted for $60 million of the $140 million on the tape.
“Not much is active today,” the source said. “Most people are home on a snow day. [Apptio] is about the only thing that’s traded.”
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