Morning Commentary: WisdomTree, Nabors price overnight; notes jump on debut

By Abigail W. Adams

Portland, Me., Feb. 10 – It was a backloaded week for the convertibles primary market with two overnight offerings pricing shortly after launching post-close on Thursday.

WisdomTree Inc. priced $130 million of long five-year convertible notes and Nabors Industries, Inc. sold an upsized $225 million of long six-year exchangeable notes after the market close on Thursday.

Both issues came as refinancings with Nabors using proceeds to fund the redemption of its straight debt – something market players expect to see as a coming trend in primary market activity.

The new paper dominated activity in the secondary space with both issues putting in strong aftermarket performances.

WisdomTree oversubscribed

WisdomTree priced $130 million of long five-year convertible notes after the market close on Thursday at par with a coupon of 5.75% and an initial conversion premium of 60%.

Pricing came toward the rich end of talk for a coupon of 5.625% to 6% and in line with talk for a fixed initial conversion premium of 60%, according to a market source.

The offering was wall-crossed and more than 4x oversubscribed, a source said.

The 5.75% notes were trading up on an outright basis with stock largely flat early in the session.

The notes were holding steady in the 100.5 to 101.25 context, a source said.

WisdomTree’s stock was flat at $5.97 shortly before 11 a.m. ET.

It was surprising that stock held up as well as it did with overnight offerings usually destroying stock, a source said.

However, the exchange aspect of the deal and heavy allocations to outright accounts was probably helping to support the stock price, a source said.

The deal came as a refinancing with $125.1 million of net proceeds to be used to repurchase $115 million in principal of its 4.25% convertible notes due June 15, 2023.

Nabors ‘does well’

Nabors priced an upsized $225 million of long six-year exchangeable notes after the market close on Thursday at par at the midpoint of talk with a coupon of 1.75% and an initial exchange premium of 22.5%.

Price talk was for a coupon of 1.5% to 2% and an initial exchange premium of 20% to 25%.

The deal was heard to be in the market with assumptions of a 475 bps credit spread and a 50% vol. or a 500 bps credit spread and a 50% vol., sources said.

Using assumptions of a 475 bps credit spread and a 50% vol., the deal looked 7.75 points cheap at the midpoint of talk, a source said.

The cheapness of the deal was to compensate for the damage the overnight offering was expected to do to stock.

The 50% vol. was an anomaly with vol. assumptions usually capped at 45%, sources said.

“But it’s certainly justified,” a source said.

The new 1.75% notes skyrocketed on an outright and dollar-neutral basis in early trade.

The notes traded up to a 103-handle with stock off 8% shortly after the opening bell.

They continued to climb as stock recovered and were wrapped around 105 shortly before 11 a.m. ET.

Nabors’ stock was changing hands at $162.36, a decrease of 6.28%, shortly before 11 a.m. ET.

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