Morning Commentary: Insight prices convertibles; Akamai, Southern Co., Workiva on tap

By Abigail W. Adams

Portland, Me., Aug. 13 – The new issue frenzy in the convertibles primary market continued with one new pricing after the market close on Monday and three more set to price after the market close on Tuesday.

Workiva Inc. plans to price $300 million of seven-year convertible notes, Akamai Technologies Inc. plans to sell $1 billion of eight-year convertible notes, and Southern Co. plans to price $1.5 billion, or 30 million par of $50 series A equity units, after the market close on Tuesday.

Akamai looked to be rich to fair value based on the assumptions used. However, as a well-known name in the convertibles space, the deal was expected to do well.

Southern Co.’s equity units were also expected to do well with mandatory paper in demand and the units expected to receive investment-grade ratings.

Insight Enterprises Inc.’s newly priced convertible notes dominated activity in the secondary space although the notes were largely wrapped around par.

Workiva’s debut

Workiva plans to price $300 million of seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.875% to 1.375% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

The offering is the first time the Ames, Iowa-based reporting and compliance solutions company is tapping the convertibles space.

Akamai again

Akamai Technologies plans to price $1 billion of eight-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%, according to a market source.

The deal looked rich to fair value based on assumptions used, a market source said.

Using assumptions of 180 bps over Libor and a 30% vol., the deal modeled out to fair value at the midpoint of talk.

While Akamai’s short-term vol. was through the roof, the company’s long-term vol. was not, a source said.

Using a more conservative credit spread and vol. assumptions, the deal looked 1 point to 1.5 points rich, a market source said.

However, Akamai is a well-known name in the convertibles space and priced a $1 billion issue of 0.125% convertible notes as recently as May 2018.

The 0.125% convertible notes due 2024 were active on Tuesday with the new deal on deck.

The 0.125% notes were changing hands around 112.5 early in the session, a market source said.

Southern Co.’s deal

Southern Co. plans to sell $1.5 billion, or 30 million par of $50 series A equity units, after the market close on Tuesday with price talk for a dividend of 6.625% to 7.125% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

With a shortage of mandatory convertible paper in the space and the equity units expected to receive an investment-grade rating, the deal is expected to do well.

Insight dominates

Insight Enterprises priced $300 million of 5.5-year convertible notes after the market close on Monday with a coupon of 0.75% and an initial conversion premium of 32.5%.

Pricing came at the rich end of talk for a coupon of 0.75% to 1.25% and at the midpoint of talk for an initial conversion premium of 30% to 35%, according to a market source.

The new paper dominated activity in the secondary space. However, the notes were largely wrapped around par with stock unchanged early in Tuesday’s session.

The notes traded as high as 100.375 but came in to trade around par with stock down about 5 cents early in the session.

The bonds saw more than $38 million in reported volume about one hour into Tuesday’s session.

Insight Enterprises stock was $51.29, a decrease of 0.53%, shortly before 11 a.m. ET.

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