Morning Commentary: Evolent Health hits the market; Aegean Marine Petroleum notes eyed

By Abigail W. Adams

Portland, Me., Oct. 18 – The secondary convertibles space opened with $150 million in new paper hitting the market.

Evolent Health, Inc. priced an upsized $150 million seven-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 1.5% and an initial conversion premium of 32.5%.

Price talk had been for a coupon of 1.25% to 1.75% and an initial conversion premium of 30% to 35%, according to a market source.

The initial size of the deal had been for $125 million. The greenshoe was also upsized to $22.5 million from $18.75 million.

The new paper hit the secondary space strong. It was seen trading between 101 to 101.5 with stock down about 1%, according to a market source.

The notes were trading on a 65% delta. About $55 million of the bonds were on the tape early in the session with a good mix of outright and swap trades, a market source said.

There were more buyers than sellers for the new notes.

“That’s pretty good for a small issue,” a market source said. “It’s trading like it was a much larger deal.”

The assumptions used for pricing, a credit spread of 400 basis points over Libor and a 40% vol., were conservative with the deal probably cheaper than it modeled, the source said.

Sources pegged the deal between fair value and 0.65 point cheap at the midpoint of talk.

Outside of the new paper, market players were eyeing the soon to mature convertible notes of Aegean Marine Petroleum Network Inc.

The company’s 4% convertible notes come due on Nov. 1.

There was activity in both the 4% convertible notes and the 4.25% convertible notes due 2021 with both trading on a 60 handle, a market source said.

“Something’s about to happen in that one,” the source said.

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