Morning Commentary: Wayfair convertible notes skyrocket on secondary market debut

By Abigail W. Adams

Portland, Me., Sept. 9 – It was an active morning in the convertibles secondary space although one name accounted for 85% of the total reported volume.

Wayfair Inc. was once again the name of the day with its new convertible notes jumping out of the gate and its outstanding convertible notes active on buybacks.

Wayfair priced $600 million of five-year convertible notes after the market close on Thursday at par with a coupon of 3.25% and an initial conversion premium of 30%.

Pricing came at the rich end of talk for a coupon of 3.25% to 3.75% and at the midpoint of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The new notes skyrocketed on debut.

The new 3.25% convertible notes traded up to 104.75 on an outright basis early in the session.

They gained 2.75 points to 3 points dollar-neutral, sources said.

There was $120 million in reported volume.

Proceeds were used to repurchase $375.4 million in principal of its 1.125% convertible notes due 2024 for an aggregate amount of $336.8 million and $229 million in principal of its 0.625% convertible notes due 2025 for an aggregate amount of $169.3 million.

The buyback price for the 1.125% convertible notes appeared to be 89.3 and for the 0.625% convertible notes 73.55.

“Pretty much everyone knew where they were going yesterday,” a source said, with the 1.125% notes expanding 2 points and the 0.625% notes expanding 3 points dollar-neutral.

Wayfair’s stock was changing hands at $50.81, an increase of 4.08%, shortly before 11 a.m. ET.

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