New Issue: $700 million Red Hat (RHT) Convertible Bonds of 2019

Our updated HOCS scores for the new RHT bond, based on 5-year bullet revised pricing believed to be 1/4 % up 30%, are as follows:

Overall: 56 (from original 54)

Growth: 46 (from original 43)

Safety: 77 (from original 76)

Our original HOCS scores assumed a 1/8% coupon and a 35% premium, the midpoints of the initial price talk. While the new scores are adequate, we note that most new issues that have traded well in the aftermarket have received overall scores above 60.  As you can see, this bond suffers from a poor growth rating, though the safety component is quite strong.