Morning Commentary: Benefitfocus convertibles hit the market, trade in a wide range

By Abigail W. Adams

Portland, Me., Dec. 21 – Friday opened with a surprise new deal hitting the convertibles secondary space.

Benefitfocus Inc. priced $200 million of five-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 1.25% and an initial conversion premium of 30%, according to a company news release and a market source.

Price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 30% to 35%.

The new paper was in focus in the secondary space and trading in a wide range, a market source said. The notes were changing hands between par and 102 on an outright basis.

The 1.25% notes were moving either in line, contracted by 0.25 point or expanded by 0.25 point dollar-neutral.

“They’re all over the place,” a market source said. Benefitfocus stock jumped early in Friday’s session, trading up to $42.37, an increase of 3.58%, shortly before 11 a.m. ET.

Sources were surprised to see a new deal price given current market conditions with credit spreads continuing to blow out and equity markets volatile.

The deal was most likely already done before it launched, a source said.

Outside of the new paper, the secondary space was quiet on Friday with many licking their wounds after what has been a brutal quarter, a source said.

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