Morning Commentary: Etsy convertibles expand; Sabre convertible preferreds flat

By Abigail W. Adams

Portland, Me., Aug. 20 – The convertibles primary market churned out what sources expect to be the last new deals of the week after the market close on Wednesday.

Etsy Inc. priced $650 million of seven-year convertible notes, and Sabre Corp. priced an upsized $300 million, or 3 million shares, of three-year $100-par series A mandatory convertible preferred stock.

The two deals bring the weekly total for new issuance to $4,075,000,000.

While the record-setting pace in the primary market has resumed, the highest volume week year to date remains the May 10 week when $8.37 billion priced over 15 deals.

The new paper was in focus in the secondary space with Etsy’s new convertible notes expanding on debut.

However, Sabre’s mandatory convertible preferred stock was flat.

Etsy in focus

Etsy priced $650 million of seven-year convertible notes after the market close on Wednesday at par with a coupon of 0.125% and an initial conversion premium of 52.5%, according to a market source.

Pricing came in line with revised terms for a coupon of 0.125% and at the rich end of revised terms for an initial conversion premium of 50% to 52.5%.

Initial price talk was for a coupon of 0.125% to 0.625% and an initial conversion premium of 47.5% to 52.5%.

The new paper saw a large dollar-neutral expansion despite its tight pricing.

The 0.125% convertible notes were up 1.5 to 2 points dollar-neutral in early trading, sources said.

Etsy became the latest issuer to tap the market to refinance its existing convertible notes.

Concurrently with the notes offering, the company exchanged $301.1 million of the principal amount of the 0% convertible notes due 2023 for $137.2 million in cash and 7.3 million shares in privately negotiated transactions.

Sabre upsizes

Sabre priced an upsized $300 million, or 3 million shares, of three-year $100-par series A mandatory convertible preferred stock after the market close on Wednesday at the midpoint of talk with a dividend of 6.5% and an initial conversion premium of 20%.

Price talk was for a dividend of 6.25% to 6.75% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The greenshoe was also upsized to $45 million.

The initial size of the offering was $250 million with a greenshoe of $37.5 million.

Concurrently with the convertible preferred stock, the company priced a secondary offering of $250 million, or 35,714,286, shares, at a public offering price of $7.00.

The 6.5% mandatory convertible preferred stock was unchanged dollar-neutral, a source said.

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