Morning Commentary: AXA, EZCorp offerings on tap; Hope Bancorp’s convertibles hit the market

By Abigail W. Adams

Portland, Me., May 9 – The convertibles primary market has been active with one deal pricing after the market close on Tuesday and two more set to price after the market close on Wednesday.

EZCorp Inc. plans to price $100 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 2% to 2.5% and an initial conversion premium of 20% to 25%.

The deal “looks cheap, but there’s some funk there,” a market source said.

EZCorp is a repeat issuer of convertible notes with $230 million outstanding in 2.125% convertible notes due 2019 and $143.75 million outstanding in 2.875% convertible notes due 2024, according to Trace data. The outstanding bonds have always traded tight on reasonable credit, the source said.

The 2.125% notes traded between 107 to 108 and the 2.875% convertible notes traded at 159.25 on Tuesday, according to Trace data.

While EZCorp’s numbers look good and the deal looks cheap, the company is in the pawn business, which carries a lot of uncertainty and puts a risk on the bonds, a market source said.

After a long wait, AXA SA plans to price $750 million of three-year bonds mandatorily exchangeable for AXA Equitable Holdings, Inc. stock after the market close on Wednesday.

Price talk is for a coupon of 6.75% to 7.25% and an initial exchange premium of 17.5% to 22.5%.

The deal looks good, but all eyes are on the common stock offering, a market source said.

The deal, which was launched in late April, will price alongside AXA Equitable Holdings’ IPO.

AXA Equitable is targeting a $3.5 billion IPO with share prices between $24.00 and $27.00.

With no trading history to pull from, “you just have to make an assumption on the vol.,” a market source said.

With a credit spread of 100 basis points and a 25% vol., the deal is attractive, the source said. With the large coupon, “outright guys love it,” the source said.

With two deals still on deck, new paper from Hope Bancorp Inc. hit the secondary market on Wednesday and was seen trading just above par out of the gate.

Hope priced $200 million of 20-year 2% convertible notes after the market close on Tuesday with an initial conversion premium of 22.5%.

Pricing came at the middle of price talk for a coupon of 1.75% to 2.25% and the cheap end of price talk for a conversion premium of 22.5% to 27.5%.

The new paper was trading between 100 to 100.5 early in the session and was largely in-line dollar neutral, a market source said.

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