Morning Commentary: Integer convertible notes offering ‘hot’; secondary mostly quiet

By Abigail W. Adams

Portland, Me., Jan. 31 – The convertibles primary market has one last deal up its sleeve before closing the books on January – Integer Holdings Corp.’s $375 million offering of five-year convertible notes, which is slated to price after the market close.

The deal was “hot,” a source said, with demand heavy in a market hungry for new paper.

While Integer’s offering lifted the tally, January 2023 still marks the lowest volume January for new deal activity by face amount and number of transactions since January 2016.

However, Integer’s offering marked what many hope will be the start of a growing trend – high-yield issuers turning to the convertibles market to meet their refinancing needs.

Meanwhile, the secondary space was relatively quiet as equity markets launched the day with gains.

The Dow Jones industrial average was up 55 points, or 0.18%, the S&P 500 index was up 0.57%, the Nasdaq Composite index was up 0.94% and the Russell 2000 index was up 1.33% shortly before 11 a.m. ET.

There was about $70 million in reported volume.

Integer eyed

Integer plans to price $375 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.125% to 2.625% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of a 375 basis points credit spared and a 35% vol., according to a market source.

Using those assumptions, the deal looked 3.8 points cheap at the midpoint of talk.

The deal was shaping up to be a blowout with strong demand for the new paper.

Integer was at one time a serial issuer of convertible notes under its former name Greatbatch.

However, the company has opted for straight debt over the past two decades.

Proceeds from the offering will be used to refinance the company’s term B loan.

Integer’s return to the convertibles market to refinance its straight debt is what many hope will be the start of a growing trend of high-yield issuers tapping the convertibles market for their refinancing needs.

© 2015 Prospect News.
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