Morning Commentary: $1.15 billion in new paper hits the convertibles market, including AXA bonds

By Abigail W. Adams

Portland, Me., May 10 – With earnings season wrapping up, the convertibles primary market has been active with three new deals totaling $1.15 billion making their market debut on Thursday.

AXA SA priced $750 million of three-year bonds mandatorily exchangeable for AXA Equitable Holdings, Inc. stock after the market close on Wednesday.

EZCorp Inc. priced an upsized $150 million of seven-year convertible notes prior to the market open on Thursday.

And Nabors Industries Ltd. priced $250 million, or 5 million shares, of three-year $50-par series A mandatory convertible preferred shares after the market close on Wednesday.

AXA’s large capital raise

AXA priced $750 million of three-year bonds mandatorily exchangeable for AXA Equitable Holdings stock after the market close on Wednesday at the cheap end of talk with a coupon of 7.25% and an initial exchange premium of 17.5%, according to a market source.

Price talk had been for a coupon of 6.75% to 7.25% and an initial exchange premium of 17.5% to 22.5%, according to a market source.

The deal, which launched in late April, was a much longer bookbuilding process due to the concurrent pricing of Equitable Holdings’ IPO, a market source said.

Equitable Holdings priced $2,745,000,000, or 137.25 million shares, of common stock at $20.00 a share after the market close on Wednesday.

Pricing of the common shares was lower than the anticipated range of $24.00 to $27.00 per share.

Equitable Holdings’ IPO was the largest IPO of the year.

The IPO and the mandatorily exchangeable bonds “was a huge capital raise,” a market source said.

The pricing of the mandatory bonds fell on the cheap end of talk largely because of the size of the offering.

“It was the largest IPO year to date, and with the mandatory on top of it, it was a lot of capital to absorb,” a market source said. “The pricing was affected by the overall size.”

The mandatory bonds were popular, however, and were up to 2x oversubscribed, the source said.

While hedge players were interested in the offering, they were a minority in the books, with the deal heavily allocated to outright players, the source said.

The mandatory bonds were seen trading up to 101 early in the session.

EZCorp upsizes

EZCorp priced an upsized $150 million of seven-year convertible notes prior to the market open on Thursday with a coupon of 2.375% and an initial conversion premium of 20%.

Pricing came at the midpoint of talk for a coupon of 2% to 2.5% and at the cheap end of talk for an initial conversion premium of 20% to 25%, according to a market source.

Morgan Stanley & Co. LLC is the bookrunner for the Rule 144A deal, which carries an upsized greenshoe of $22.5 million. The initial size of the deal had been $100 million with a greenshoe of $15 million.

The new 2.375% notes were seen at par bid pre-open, a market source said.

Nabors trades up

Nabors Industries priced $250 million, or 5 million shares, of three-year $50-par series A mandatory convertible preferred shares after the market close on Wednesday with a dividend of 6% and an initial conversion premium of 20%.

Pricing came at the midpoint of talk for a dividend of 5.75% to 6.25% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The convertible preferred shares were performing well on their secondary market debut.

They were seen at 51.25 bid, 51.35 offered early in the session, a market source said.

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