Morning Commentary: Envestnet convertibles play to massive demand, jump on debut

By Abigail W. Adams

Portland, Me., Nov. 15 – It was an active morning in the convertibles secondary space as the first new paper of the month made its aftermarket debut.

New paper from Envestnet Inc. dominated activity in the secondary space with the offering playing to heavy demand during bookbuilding and jumping on an outright and dollar-neutral basis in secondary market activity.

Envestnet priced an upsized $500 million of five-year convertible notes after the market close on Monday at par at the rich end of talk with a coupon of 2.625% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 2.625% to 3.125% and an initial conversion premium of 27.5% to 32.5%.

The greenshoe was also upsized to $75 million.

The initial size of the offering was $350 million with a greenshoe of $52.5 million.

The new paper traded up to a 102-handle out of the gate with stock relatively unchanged.

The notes expanded about 2.5 points on a dollar-neutral basis.

The notes were heavily traded on swap, a source said.

Envestnet’s offering was the latest refinancing deal to hit the tape with proceeds used to help repurchase for cash $300 million in principal of its 1.75% convertible notes due 2023 for $312.4 million plus accrued interest and $200 million in principal of its 0.75% convertible notes due 2025 for $181.8 million plus accrued interest.

Envestnet’s outstanding convertible notes were active on the buybacks.

There were several prints of the 1.75% convertible notes due 2023 at 101.125 and of the 0.75% convertible notes due 2025 at 90.886, which appeared to be the buyback prices, a source said.

Holders of the 0.75% convertible notes saw large gains as a result of the buybacks with the notes gaining 4 points from their previous level, a source said.

After wobbling at the open, Envestnet’s stock was changing hands at $56, an increase of 1.14%, shortly before 11 a.m. ET.

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