Envestnet convertibles offering plays to strong demand; Etsy gains; JetBlue improves

By Abigail W. Adams

Portland, Me., Nov. 14 – The convertibles primary market returned to action on Monday with the first deal of November on deck.

Envestnet Inc. plans to price $350 million of five-year convertible notes after the market close.

The refinancing deal looked attractive and was heard to be playing to solid demand.

Envestnet’s offering is the first new deal of November with earnings and the continued fragility of the market keeping potential issuers at bay.

However, if equity markets remain stable following last week’s rally, sources are expecting a burst of new deal activity in the coming weeks, especially in the form of refinancing deals.

Companies may be motivated to get deals done before the new year when outstanding issues turn into liabilities on the balance sheets, a source said.

Meanwhile, it was a sleepy start to the week in the secondary space with volume thin as equities struggled to find direction.

Indexes wobbled between gains and losses throughout the session before a round of late-day selling pushed them firmly into negative territory.

The Dow Jones industrial average closed down 211 points, or 0.63%, the S&P 500 index closed down 0.89%, the Nasdaq Composite index closed down 1.12% and the Russell 2000 index closed down 1.14%.

There was $30 million in reported volume about one hour into the session and $330 million on the tape about one hour before the market close.

Etsy Inc.’s 0.25% convertible notes due 2028 were on the rise as stock continued to post gains despite a pullback in the broader market ahead of a heavy week of earnings and economic data from the retail sector.

JetBlue Airways Corp.’s 0.5% convertible notes due 2026 continued to improve in active trading.

Envestnet in demand

Envestnet plans to price $350 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 2.625% to 3.125% and an initial conversion premium of 27.5% to 32.5%.

The deal was in the market with assumptions of a 400 basis points credit spread and a 33% vol., according to a market source.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of talk.

The deal looked good with the valuation in line with the financial technology company’s outstanding 0.75% convertible notes due 2025 and 1.75% convertible notes due 2023, a source said.

Proceeds from the new offering will be used to repurchase a portion of the company’s outstanding convertible notes in privately negotiated transactions.

Both tranches are being targeted for repurchase with the amount determined by market sentiment, a source said.

Allocations for the new offering are expected to be tight with the deal to largely be placed with existing holders, another source said.

However, demand for the offering was strong with Envestnet deals showing historical outperformance on their market debut.

“In the past, these have been 2.5 points to 3 points out of the gate,” a source said.

While the buyback and capped call may dent the new notes’ debut, the new paper will be index eligible.

Etsy rises

While the broader market pulled back on Monday, Etsy’s stock and convertible notes continued to post strong gains ahead of a heavy week of earnings and economic data for the retail sector.

Etsy’s 0.25% convertible notes due 2028 rose 2.5 points outright with stock up more than 6% in intraday activity.

The notes were changing hands at 84.875 versus a stock price of $122.07 in the late afternoon.

With $10 million in reported volume, the notes were the most actively traded of Monday’s session.

Etsy’s stock traded to a low of $113.99 and a high of $123.68 before closing the day at $119.74, an increase of 3.55%.

The e-commerce company for homemade and vintage item’s stock gained 19% the previous week.

The continued gains come on the eve of a heavy week for the retail sector with several high-profile earnings reports due and the monthly retail sales report out Wednesday.

JetBlue better

JetBlue’s 0.5% convertible notes due 2026 continued to improve in active trading on Monday.

The notes remained on a 76-handle as stock gave back some gains from the previous week.

The 0.5% notes were changing hands at 76.375 versus a stock price of $8.20 in the late afternoon.

The yield was about 8.7%.

There was $8 million in reported volume.

JetBlue’s stock traded to a low of $7.96 and a high of $8.23 before closing the day at $8, a decrease of 1.36%.

Mentioned in this article:

Envestnet Inc. NYSE: ENV

Etsy Inc. Nasdaq: ETSY

JetBlue Airways Corp. Nasdaq: JBLU

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