Actionable Ideas for Companies and Sponsors
Convertible Market Remains Resilient and Terms Remain at Historically Attractive Levels
Despite recent market volatility, the convertible market has been resilient and open to new issuance. A continued supply/demand imbalance with redemptions outpacing issuance, as well as investor outperformance relative to other asset classes has supported the general market backdrop. These dynamics, combined with relatively low interest rates and higher equity volatility, are driving attractive terms for issuers. Coupons remain at historically attractive levels with the average coupon for corporate issuers being less than 2% in 2018, and conversion premiums remain high, with the average conversion premium in 2018 being 30+%, along with the ability to raise the conversion premium to 100% with call spreads.