DocuSign oversubscribed, expands on debut; International Flavors notes trade flat

By Abigail W. Adams

Portland, Me., Sept. 14 – The primary market rounded out the week with the pricing of an upsized $500 million offering from DocuSign Inc., lifting new deal volume by dollar amount to $1.25 billion for the week.

The deal was well oversubscribed during bookbuilding with strong interest from long-only accounts, a market source said.

While there was a healthy allocation to hedge accounts, some passed on the deal due to the borrow, sources said.

The notes dominated trading activity in the secondary space. While they dropped below par with stock down in the afternoon, they were expanded dollar-neutral, sources said.

International Flavors & Fragrances Inc.’s newly priced 6% tangible equity units due 2021 remained active in the secondary space although the notes were trading largely flat.

The units saw large gains on an outright and dollar-neutral basis on their market debut on Thursday.

Trading volume was light outside of the new deals. Intel Corp.’s 3.25% convertible notes due 2039 were among the volume leaders of Friday’s session. However, the notes were largely unchanged in trading activity.

New deal volume is already up 40% year over year with the pace expected to continue.

There will be a steady pipeline of new deals through the final weeks of September until the earnings season blackout with another wave is expected once the blackout is through, a market source said.

DocuSign oversubscribed

DocuSign priced an upsized $500 million of five-year convertible notes prior to the market open on Friday at par with a coupon of 0.5% and an initial conversion premium of 30%.

Pricing came at the rich end of talk for a coupon of 0.5% to 1% and at the cheap end of talk for an initial conversion premium of 30% to 35%.

The initial size of the deal was $400 million. The greenshoe was also upsized to $75 million from $60 million.

The book for the deal was well oversubscribed with strong interest from long-only accounts, a market source said. There was also a healthy allocation to hedge accounts.

However, some hedge players passed on the deal over frustration with the borrow, a market source said.

Price talk was heard to have tightened to a coupon of 0.625% to 0.75% and an initial conversion premium of 32.5% during bookbuilding.

The deal was oversubscribed at the midpoint of talk. However, DocuSign was interested in a 0.5% cash coupon, a source said.

While a different combination, pricing at the rich end of coupon talk and the cheap end of the initial conversion premium was similar to pricing at the midpoint, the source said.

The new 0.5% notes dominated trading activity in the secondary space with the notes accounting for $127 million of the $365 million on the tape by late afternoon.

They were seen trading at par 1/8 bid, par ½ offered with stock down about 1.2% early in the session.

The notes dropped below par with stock continuing to trade down into the afternoon.

The notes were seen trading between 99.125 and 99.625 in the afternoon. They were expanded about 0.5 point dollar-neutral, a market source said.

However, outright players drove the trading activity with only a portion of the trades done on swap, a source said.

The borrow continued to pose a problem, a market source said.

While the rate on the borrow of common stock is high, it is expected to improve.

In addition to the concurrent equity offering of 8.06 million shares, which priced at $55.00 per share, there will also be a lock-up release of 125 million shares in October, a market source said.

DocuSign stock closed Thursday at $53.79, a decrease of 2.85%.

International Flavors flat

International Flavors’ newly priced 6% tangible equity units due 2021 were trading largely flat in the secondary space on Friday after making large gains on their Thursday debut.

They were seen trading at $52.54, an increase of 22 cents, or 0.42%, early in Friday’s session with stock largely flat.

However, they came in during the afternoon and closed the day largely unchanged at $52.34, an increase of 2 cents, or 0.03%.

International Flavors common stock closed the day at $136.5, a decrease of 0.53%.

About 1.6 million units traded during Thursday’s session.

International Flavors priced a $750 million offering of the $50-par tangible equity units concurrently with a $1.5 billion offering of common stock after the market close on Wednesday.

The notes traded up more than $2 and were expanded about 0.75 point dollar-neutral on their market debut.

Intel active

Intel’s 3.25% convertible notes due 2039 were the second highest volume mover of convertible bonds on Friday, although trading paled in comparison to DocuSign.

There were about $15 million of the bonds on the tape by late afternoon.

The 3.25% notes were seen trading at 221.25 versus a stock price of $45.56.

The notes trade at about parity and were unchanged on the day, a market source said.

Intel stock closed Friday at $53.79, a decrease of 2.85%.

The 3.25% notes become callable in August 2019 provided Intel’s stock continues to trade above the 150% threshold. There are $2 billion of the notes outstanding.

Intel called the full outstanding $1.6 billion of its 2.95% convertible notes due 2035 in December 2018.

Mentioned in this article:

DocuSign Inc. Nasdaq: DOCU

Intel Corp. Nasdaq: INTC

International Flavors & Fragrances Inc. NYSE: IFF

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