Morning Commentary: Peloton convertible bond offering eyed, expected to see demand

By Abigail W. Adams

Portland, Me., Feb. 8 – The convertibles primary market jumpstarted the week with one new offering on deck.

Peloton Interactive Inc. plans to price $600 million of five-year convertible notes after the market close on Monday with price talk for a fixed coupon of 0% and an initial conversion premium of 55% to 60%, according to a market source.

The deal was heard to be in the market with assumptions of 200 basis points over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked 2.69 points cheap at the midpoint of talk.

However, some accounts felt the credit spread was tight and opted for a spread of 225 bps to 250 bps over Libor, adding “it doesn’t change the equation,” a source said. “It’s a very good bond to own and will do very well.”

One source pegged the credit spread at 275 bps over Libor, which looked to be fair value. “But we all know this is going to trade extremely well, a source said.

Peloton is a large-cap tech company and a household name.

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