Morning Commentary: Altair makes aftermarket on brutal day for equities, flat on swap

By Abigail W. Adams

Portland, Me., June 10 – It was a quiet morning in the convertibles secondary space on Friday with new paper from Altair Engineering Inc. slow to trade as equities got pummeled following May’s Consumer Price Index report.

Altair priced $200 million of five-year convertible notes after the market close on Thursday at par with a coupon of 1.75% and an initial conversion premium of 30%.

Pricing came at the cheap end of talk for a coupon of 1.25% to 1.75% and at the rich end of talk for an initial conversion premium of 25% to 30%.

The paper was marked at par bid on swap with the notes not yet quoted outright about one hour into the session, a source said.

The deal was heard to have played to heavy demand during bookbuilding with mostly hedge players involved.

However, the deal had “a lot of moving parts,” with proceeds used to buy back a portion of the company’s 0.25% convertible notes due 2024, a source said.

Altair entered into privately negotiated transactions to repurchase $148.2 million in principal of its 0.25% convertible notes due 2024 for $192.4 million in cash.

The 0.25% notes were among the most actively traded in the secondary space as a result of the buyback, a source said.

There were several prints of the notes at 129.79, according to Trace data.

Altair’s stock was deep in the red early in the session alongside broader markets.

Stock was changing hands at $51.63, a decrease of 6.37%, shortly before 11 a.m. ET.

The new paper made its aftermarket debut on a brutal day for equities after the latest inflation data reflected a larger-than-anticipated increase, sparking a reassessment of the Federal Reserve’s rate hike schedule.

The 10-year Treasury yield shot up to 3.116% and the Dow Jones industrial average was down 745 points, or 2.32%, the S&P 500 index was down 2.68%, the Nasdaq Composite index was down 3.32% and the Russell 2000 index was down 2.58% shortly before 11 a.m. ET.

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