Morning Commentary: Sunnova Energy convertible notes jump on debut

By Abigail W. Adams

Portland, Me., Aug. 17 – New paper remained in focus in the convertibles market on Wednesday with the latest deal to clear the primary market playing to heavy demand during bookbuilding and performing well in its secondary market debut.

Sunnova Energy International Inc. priced an upsized $500 million offering of six-year convertible notes after the market close on Tuesday at par with a coupon of 2.625% and an initial conversion premium of 30%.

Pricing came at the cheap end of narrowed talk for a coupon of 2.375% to 2.625% and at the rich end of talk narrowed talk for an initial conversion premium of 27.5% to 30%.

Initial price talk was for a coupon of 2.375% to 2.875% and a premium of 25% to 30%.

The new paper became the latest to make large outright and dollar-neutral gains in the secondary space.

The notes were changing hands at 101.25 versus a stock price of $25.68 early in the session.

They expanded 2.5 points dollar-neutral, a source said.

The notes dominated activity in the secondary space, accounting for $68 million out of the $106 million in reported volume about one hour into the session.

Sunnova’s stock was trading at $24.91, a decrease of 5.43%, shortly before 11 a.m. ET.

The notes were making gains despite a rough start for equity markets with indexes in the red following U.K. inflation data and the market jitters ahead of the release of the Federal Reserve’s July meeting minute notes.

The Dow Jones industrial average was down 220 points, or 0.65%, the S&P 500 index was down 0.93%, the Nasdaq Composite index was down 1.53% and the Russell 2000 index closed down 1.78% shortly before 11 a.m. ET.

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