Morning Commentary: Wayfair convertibles hit the market; Great Ajax add-on prices

By Abigail W. Adams

Portland, Me., Nov. 15 – Equity markets stood poised for another ugly session on Thursday with the Dow Jones industrial average opening the day down 261 points before beginning to rebound by midday.

However, the primary market continued to squeak out new deal activity.

Wayfair Inc. priced $500 million of six-year convertible notes prior to the market open on Thursday. The new paper dominated activity in the secondary space with the notes trading below par.

Great Ajax Corp. priced a $15.85 million tap of its $25-par 7.25% convertible notes due 2024 at 98.8% of par, or $24.69, and an initial conversion premium of 16.3%.

Pricing came toward the cheap end of talk for a discounted issue price of 1% to 1.25% of par, according to a market source.

Wayfair hits the market

Wayfair sold $500 million of six-year convertible notes prior to the market open on Thursday at the cheap end of talk with a coupon of 1.125% and an initial conversion premium of 32.5%.

Price talk had been for a coupon of 0.625% to 1.125% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The new 1.125% convertible notes were in focus and trading well below par in the secondary space.

Initial trades were as low as 98.75, a market source said. The notes continued to trade between 98.75 to 99 early in the session.

Wayfair stock was off 0.5% to 1% early Thursday.

“It’s a tough credit with such a tiny coupon,” a market source said.

Given market conditions, it was also a difficult time to price such a large deal.

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