Morning Commentary: American Water exchangeable notes price, gain on trading debut

By Abigail W. Adams

Portland, Me., June 27 – It was an active start to the day in the convertibles secondary space as $900 million in new supply made its aftermarket debut.

American Water Capital Corp. priced $900 million of three-year notes (Baa1/A) exchangeable for American Water Works Co. Inc.’s common shares after the market close on Monday at par with a coupon of 3.625% and an initial exchange premium of 22.5%.

Pricing came at the midpoint of talk for a coupon of 3.375% to 3.875% and at the cheap end of talk for an initial exchange premium of 22.5% to 27.5%.

The new paper was putting in a solid performance in the secondary space with volatility better bid on Tuesday.

“Buyers are coming for the bonds,” a source said. “The vol. is better than it was yesterday.”

The new paper was changing hands in the 100.375 to 100.625 context with stock up early in the session.

American Water’s stock was trading at $141.87, an increase of 1.22%, shortly before 11 a.m. ET.

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