Morning Commentary: Varonis eyed; Bloomin’ Brands, Norwegian Cruise Line in secondary

By Abigail W. Adams

Portland, Me., May 6 – The new deal pipeline for convertibles continued on Wednesday with one more overnight offering set to price after the market close and two new deal making their aftermarket debut.

Varonis Systems Inc. plans to price $175 million convertible notes due Aug. 15, 2025 after the market close on Wednesday.

The deal looked cheap even with a conservative credit spread, a market source said.

Meanwhile, new paper from NCL Corp. Ltd., a subsidiary of Norwegian Cruise Line Holdings Ltd., and Bloomin’ Brands Inc. hit the secondary space.

Varonis eyed

Varonis Systems plans to price $175 million of convertible notes due Aug. 15, 2025 after the market close on Wednesday with price talk for a coupon of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Using a credit spread of 700 basis points over Libor and a 45% vol., the deal looked almost 3 points cheap at the midpoint of talk, a source said.

While tech companies like Varonis typically have a credit spread of 350 bps over Libor, the source opted for a more conservative credit spread given the market environment and the spreads that comparable companies were trading with.

Norwegian Cruise active

NCL Corp., a subsidiary of Norwegian Cruise Line, priced an upsized $750 million of four-year exchangeable notes after the market close on Tuesday at par with a coupon of 6% and an initial exchange premium of 25%.

Pricing came at the midpoint of talk for a coupon of 5.75% to 6.25% and at the rich end of talk for an initial exchange premium of 20% to 25%, according to a market source.

Concurrently with the convertible notes offering, the company also priced an upsized offering of $675 million 12¼% senior secured notes due 2024 at 99 to yield 12.575% and a secondary offering of 36,363,636 common shares, which priced at $11.00 per share.

The notes traded up on an outright basis.

However, they were lagging dollar-neutral on the move up, a market source said.

The 6% notes were changing hands at 104 early in the session.

The notes dominated activity in the secondary space with more than $227 million in reported volume about one hour into the session.

Norwegian Cruise stock was $11.59, an increase of 3.57%, shortly before 11 a.m. ET.

Bloomin’ Brands volatile

Bloomin’ Brands priced $200 million of five-year convertible notes after the market close on Tuesday at par at the cheap end of talk with a coupon of 5% and an initial conversion premium of 25%, according to a company news release.

Price talk was for a coupon of 4.5% to 5% and an initial conversion premium of 25% to 30%, according to a market source.

The notes were volatile on their aftermarket debut.

They were quoted as low as 97 bid pre-open. However, they bounced back with stock up early in Wednesday’s session.

The notes were changing hands between 100.25 and 100.75 early Wednesday.

Bloomin’ Brands stock traded as high as $10.09 early Wednesday but came in to $9.78, an increase of 2.79%, shortly before 11 a.m. ET.

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