Morning Commentary: Wayfair’s new 0.375% convertibles trade up in heavy volume; Workday on tap

By Stephanie N. Rotondo

Seattle, Sept. 12 – A new convertible bond issue from Wayfair Inc. was taking up the bulk of trading early Tuesday.

A trader said there was “super heavy volume” in the new 0.375% convertible notes due 2022.

He pegged the paper in a 104 to 104.125 context, which compared to the issue price of par.

The company’s stock (NYSE: W) was also faring well, rising $2.29, or 2.97%, to $79.37 by mid-morning.

Late Monday, the Boston-based home décor online retailer said it had sold $375 million of the convertibles at par with an initial conversion premium of 35%.

The Rule 144A deal was increased from an expected $300 million. Initial price talk was for a 0.625% to 1.125% yield and an initial conversion premium of 32.5% to 37.5%.

Goldman Sachs & Co. and Citigroup Global Markets Inc. ran the books.

Meanwhile, the market was also waiting for Workday Inc. to price its proposed $1 billion offering of five-year convertible senior notes.

The deal was announced after the close on Monday. Price talk is for a 0% to 0.5% yield and an initial conversion premium of 35% to 40%, a market source reported.

Morgan Stanley & Co. LLC and BofA Merrill Lynch are running the books.

Ahead of pricing, the company’s existing convertible issues were in play.

A market source saw the 1.5% convertible notes due 2020 trading with a 142 handle, while the 0.75% convertible notes due 2018 were pegged at 132.625.

However, as the bonds rarely trade, it was unclear which direction the notes were moving, the source noted.

As for the company’s underlying stock (NYSE: WDAY), it was off $1.94, or 1.79%, at $106.33 in early dealings.

The company plans to use proceeds from the new issue to repay or repurchase its older convertible debt issues.

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