Morning Commentary: NextEra Energy prices with discount; Pegasystems convertibles eyed

By Abigail W. Adams

Portland, Me., Feb. 19 – The convertibles primary market was in high gear on Wednesday with one new deal pricing prior to the market open and one more on deck for after the market close.

NextEra Energy Inc. priced $2.5 billion three-year $50-par equity units at a discount prior to the market open on Wednesday.

While price talk on the offering widened during bookbuilding, the equity units were expanding in the aftermarket.

Pegasystems Inc. plans to price $450 million of five-year convertible notes after the market close on Wednesday.

The deal looked cheap based on underwriters’ assumptions, sources said.

NextEra widens talk

NextEra Energy priced $2.5 billion three-year $50-par equity units prior to the market open on Wednesday with a reoffer price of $48.75, a dividend of 5.279% and a threshold appreciation premium of 25%, according to a market source.

Pricing came in line with revised price talk of a reoffer price of $48.75, a fixed coupon of 5.279% and a fixed premium of 25%, according to a market source.

Initial price talk was for a reoffer price of $49, a fixed coupon of 5.279% and a fixed premium of 25%, according to a market source.

While price talk widened during bookbuilding, the equity units were performing well in active trading in the secondary space.

The units were hovering around their issue price with stock off almost 2.5% early in the session.

They were seen at $48.55 bid, $48.75 offered versus a stock price of $275.00, a source said.

NextEra stock was $276.13, a decrease of 2.10%, shortly before 11 a.m. ET.

Pegasystems looks cheap

Pegasystems plans to price $450 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The deal was heard to be marketed with assumptions of 225 basis points over Libor and a 28% vol., a market source said.

Using those assumptions, the deal looked a little over 1 point cheap at the midpoint of talk.

However, some sources felt the software company deserved more conservative credit and vol. assumptions.

Using a credit spread of 250 bps over Libor and a 27% vol., the deal modeled just 0.25 point cheap at the midpoint of talk, a source said.

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