Actionable Ideas for Companies and Sponsors
The Convertible Market Continues to Be Highly Favorable for Issuers
Due to strong investor appetite and the continued supply/demand imbalance, 2013 year-to-date U.S. convertible issuance significantly exceeds 2012 full-year total issuance. Key themes from recent convertible issuance include:
Increased use of call spreads to increase effective conversion prices: This year 31% of convertible debt offerings have included a call spread, and since 2012, call spreads have increased the average conversion premiums from 31% to 72%.
Interest rate volatility attracting issuers: As the Fed continues to signal that it will curtail its market activity and as rate volatility increases, convertible issuance should continue to accelerate as issuers look to lock in historically low interest rates.