Morning Commentary: Convertibles primary opens with Copa Holdings, Farfetch offerings

By Abigail W. Adams

Portland, Me., April 27 – The convertibles primary market launched the week with two new offerings.

Copa Holdings SA plans to price $350 million of five-year convertible notes and Farfetch Ltd. plans to price $300 million of seven-year convertible notes after the market close on Monday.

The deals looked cheap, sources said.

Copa notes on tap

Copa Holdings plans to price $350 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 4% to 4.5% and an initial conversion premium of 25% to 30%.

The deal was heard to be in the market with assumptions of 1,000 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal modeled about 6.5 points cheap at the midpoint of talk.

The Panama City-based parent company of Copa Airlines has taken an enormous hit from the coronavirus pandemic alongside the broader travel industry.

The company recently reported a decline in passenger revenue of 43% for March with the company’s operations suspended on March 23.

The airline hopes to resume operations on June 1 with humanitarian flights beginning on May 23, the company said in a press release.

Farfetch offering eyed

Farfetch plans to price $300 million of seven-year convertible notes after the market close on Monday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of 900 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 4.25 points cheap at the midpoint of talk, sources said.

The online fashion retailer released preliminary first-quarter earnings last week.

The company expects losses of $70 million to $125 million in the first quarter and withdrew guidance.

However, the company stated it has been immune to the economic impact of the coronavirus, due to its business model, which predominantly focuses on online sales, the company said in a press release.

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