Morning Commentary: Convertibles primary prices $2.75 billion; new paper expands early

By Abigail W. Adams

Portland, Me., Sept. 8 – The convertibles primary market capped one of the busiest weeks of the year with $2.75 billion pricing.

Vishay Intertechnology Inc. priced an upsized $650 million of seven-year convertible notes (BB+); Advanced Energy Industries Inc. priced $500 million of five-year convertible notes; Seagate HDD Cayman sold $1.3 billion of five-year notes exchangeable for Seagate Technology Holdings plc shares; and Corporate Office Properties Trust priced $300 million of five-year exchangeable notes post-close on Thursday.

Thursday marked the busiest day of 2023 for new deal activity with the holiday truncated week the busiest week of 2023 by number of transactions and second busiest by dollar amount.

The new deal tally for the Sept. 5 week currently stands at $4.395 billion, which priced over seven deals.

The weekly tally is second only to the Feb. 19 week when $5.49 billion priced over four deals, although the exercise of greenshoes promises to lift the week to the busiest week of the year by dollar amount as well.

The active pace of issuance is expected to continue with refinancings and tight credit spreads driving issuers to the market.

While deals had been pricing tight and underperforming in the secondary space, pricing is beginning to cheapen with the deals to clear the market on Thursday falling at the midpoint or wide end of talk.

The cheaper pricing was supporting the secondary market performance of the new paper with the deals to clear the primary on Thursday putting in strong aftermarket debuts.

Vishay sees nominal gains

Vishay priced an upsized $650 million of seven-year convertible notes (BB+) after the market close on Thursday at par with a coupon of 2.25% and an initial conversion premium of 20%.

Pricing came in line with talk for a fixed coupon of 2.25% and at the cheap end of talk for an initial conversion premium of 20% to 25%.

The greenshoe was also upsized to $100 million.

The initial size of the offering was $600 million with a greenshoe of $90 million.

The new paper was the underperformer of Thursday’s deals although it saw nominal outright and dollar-neutral gains.

The new 2.25% notes traded as high as 101 early in the session but came in to trade at 100.5 with stock largely flat.

The notes expanded about 0.5 point dollar-neutral, a source said.

Vishay’s stock was changing hands at $24.96, a decrease of 0.70%, shortly before 11 a.m. ET.

While Vishay’s new paper saw nominal gains, the deal came as a refinancing.

The company entered into privately negotiated transactions to repurchase $370.2 million in principal of its 2.25% convertible notes due 2025 for $388.8 million in cash.

The kiss was in the buyback, a source said, with holders that participated making 2.5 points on the exchange.

Seagate expands

Seagate priced $1.3 billion of five-year exchangeable notes after the market close on Thursday at par at the midpoint of talk with a coupon of 3.5% and an initial exchange premium of 30%.

Price talk was for a coupon of 3.25% to 3.75% and an initial exchange premium of 27.5% to 32.5%.

The notes were putting in a strong performance as stock rebounded from a 10% drop the previous session.

The 3.5% notes were seen at 102.5 early in the session.

They expanded 1.5 points to 1.75 points on a dollar-neutral, or hedged, basis, a source said.

Seagate’s stock was trading at $64.06, an increase of 0.97%, shortly before 11 a.m. ET.

Corporate Office trades up

Corporate Office Properties Trust priced $300 million of five-year exchangeable notes after the market close on Thursday at the cheap end of talk with a coupon of 5.25% and an initial exchange premium of 22.5%.

Price talk was for a coupon of 4.75% to 5.25% and an initial exchange premium of 22.5% to 27.5%.

The notes traded up to 102 early in the session.

They expanded about 1.5 points dollar-neutral, a source said.

Corporate Office’s stock was trading at $25.09, an increase of 2.58%, shortly before 11 a.m. ET.

Advanced Energy strong

Advanced Energy sold $500 million of five-year convertible notes after the market close on Thursday at par at the midpoint of talk with a coupon of 2.5% and an initial conversion premium of 30%.

Price talk was for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%.

The new paper was also strong in the aftermarket and popped to a 102-handle.

The notes were changing hands in the 102.125 to 102.375 context early in the session.

The convertibles expanded 1.5 points to 1.75 points dollar-neutral.

Advanced Energy’s stock was trading at $105.82, an increase of 0.07%, shortly before 11 a.m. ET.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.