WY New Issue Color- “Outrights love paper”
On the mids, the valuation of the new WY mandatory looks similar to the recently issued Dominion mandatories. Using 31 and 28 vols and a 75 bps credit spread, these model about 1.25% cheap. While the valuation itself is fairly boring, it’s coming with a stock deal. That usually makes the deal trade well. Also, this is a sector which has little representation in the current convertible market which is positive for richening. Just look at UTX. In the past, deals in this space had wide outright ownership and tended to trade rich. We would also note that the technicals appear positive. Finally, in comparison to Dominion, there is only one tranche which should make it easier to richen. Thus, consider buying the deal and holding it as it richens.