Gossamer, Sea on tap; Envista upsizes; Southwest Airlines, Pioneer Natural expand

By Abigail W. Adams

Portland, Me., May 18 – While the convertibles primary market was expected to slow its pace in the coming week, the calendar ballooned on Monday with two deals set to price after the market close on Monday and two more on deck for Tuesday.

Envista Holdings Corp. plans an offering of five-year convertible notes and Gossamer Bio Inc. plans to price an offering of seven-year convertible notes after the market close on Monday.

Sea Ltd. plans to price an offering of long five-year convertible notes and RealPage, Inc. plans to price an offering of five-year convertible notes after the market close on Tuesday.

While Envista’s deal looked cheap based on underwriters’ assumptions, some sources felt those assumptions were aggressive.

However, the deal was in demand during bookbuilding with the offering upsizing, sources said.

Gossamer’s offering also modeled cheap. However, the deal was heard to be wall-crossed.

Meanwhile, the secondary space launched the week on strong footing as equities surged following positive early results from a coronavirus vaccine trial and comments by Federal Reserve chairman Jerome Powell about continued economic support.

The secondary space was up by points, a market source said.

Several of the deals that priced last week that had struggled improved by about 0.5 point dollar-neutral.

Pioneer Natural Resources Co.’s 0.25% convertible notes due 2025 continued to gain on an outright and dollar-neutral basis as crude oil futures rose above $30 a barrel.

NCL Corp. Ltd.’s 6% exchangeable notes due 2024 for Norwegian Cruise Line Holdings Ltd. jumped outright as stock skyrocketed on Monday.

Airlines stock also caught a bid on Monday on upbeat data from the Transportation Security Administration.

Southwest Airlines Co.’s 1.25% convertible notes due 2025 continued to see high-volume activity with the notes rebounding on an outright and dollar-neutral basis.

While Spirit Airlines Inc.’s 4.75% convertible notes due 2025 jumped double digits on an outright basis, they were still struggling dollar-neutral.

Gossamer wall-crossed

Gossamer Bio plans to price $175 million of seven-year convertible notes after the market close on Monday at par with a fixed coupon of 5% and a fixed initial conversion premium of 22.5%, according to a market source.

The deal was heard to be marketed with assumptions of 1,200 basis points over Libor and a 40% vol., which modeled about 9.875 points cheap, a source said.

However, the deal was heard to be wall-crossed.

Envista upsizes

Envista plans to sell five-year convertible notes after the market close on Monday with price talk for a coupon of 1.875% to 2.375% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be in demand during bookbuilding with the deal upsizing to $450 million from $400 million.

It was marketed with assumptions of 700 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 3.25 points cheap at the midpoint of talk, a source said.

Other sources also pegged the deal between 3 and 3.5 points cheap at the mids.

However, some sources felt those assumptions were aggressive.

Prior to the market pricing in the economic impact of the coronavirus, Envista’s stock “didn’t move,” a source said.

The holding company for dental products and services saw its EBITDA take an enormous hit recently, the source said.

“It’ll be interesting to see how this one goes,” a source said. “If people are bullish, it should do OK.”

The company, a spinoff from Danaher Corp., was liked by investors, a source said.

The deal was heard to be pricing with a coupon of 2.375%, the cheap end of talk, and an initial conversion premium of 32.5%, the midpoint of talk.

Tuesday’s deals

Sea plans to price $1 billion of long five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.125% to 2.625% and an initial conversion premium of 30% to 35%, according to a market source.

Goldman Sachs (Asia) LLC is bookrunner for the Rule 144A and Regulation S offering, which carries a greenshoe of $150 million.

Concurrently with the convertible notes offering, the company will exchange a portion of its 2.25% convertible notes due 2023 for cash, American Depositary Shares, or a combination of both in privately negotiated transactions.

RealPage plans to price $300 million in five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Goldman Sachs & Co. LLC and BofA Securities Inc. are joint bookrunners for the registered offering, which carries a greenshoe of $45 million.

Concurrently, the company will price a secondary offering of common stock of up to $300 million.

Pioneer expands

Pioneer Natural Resources’ 0.25% convertible notes due 2025 continued to rebound on Monday as stock and crude oil futures surged.

The 0.25% convertible notes gained more than 6 points outright.

They traded up to a 104-handle with stock up more than 7% early Monday and changed hands as high as 106.25 as stock continued to climb in the afternoon.

The notes expanded about 1.5 points dollar-neutral, a source said.

Pioneer stock traded to a low of $87.52 and a high of $94.23 before closing the day at $93.38, an increase of 12.70%.

Crude oil futures traded up to a two-month high on Monday with the soon-to-expire WTI crude oil contract for June trading as high as $33.32 before settling at $31.89, an increase of $2.39 or 8.12%.

Crude oil prices surged as demand grows amid the slow reopening of the economy and production cuts continue.

Norwegian Cruise Line up

NCL’s 6% exchangeable notes due 2024 jumped on an outright basis as stock skyrocketed on Monday.

After languishing below par for the past week, the 6% notes gained more than 10 points outright.

They traded up to a 110-handle in the late afternoon with stock up more than 18%.

However, the notes were moving largely inline on a dollar-neutral basis, a source said.

Norwegian Cruise stock traded to a low of $11.76 and a high of $13.47 before closing the day at $12.88, an increase of 17.95%.

Airlines catch a bid

Monday was a strong day for the equities of embattled airlines, which have been on a downward trajectory since early May when famed investor Warren Buffett announced Berkshire Hathaway was exiting its position in the airline industry.

Southwest Airlines’ 1.25% convertible notes due 2025 jumped more than 7 points outright to trade up to 99.375 last Monday afternoon.

They expanded about 1.5 points dollar-neutral, a source said.

Southwest Airlines stock traded to a low of $25.55 and a high of $27.24 before closing the day at $27.09, an increase of 13.49%.

While volume was light, Spirit Airlines’ 4.75% convertible notes due 2025 also jumped on an outright basis as stock soared.

After dipping as low as the mid-70s last week, the notes gained 12 points outright to 92.625 on Monday.

However, they continued to struggle on a dollar-neutral basis.

The notes remained contracted 6.5 points dollar-neutral since they hit the secondary space on May 8, a source said.

Spirit Airlines stock traded to a low of $8.81 and a high of $10.19 before closing the day at $9.99, an increase of 24.72%.

The stock of several airlines soared on Monday after the Transportation and Safety Administration released upbeat data about the number of travelers going through its checkpoints.

Mentioned in this article:

Envista Holdings Corp. NYSE: NVST

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH

Pioneer Natural Resources Co. NYSE: PXD

Southwest Airlines Co. NYSE: LUV

Spirit Airlines Inc. NYSE: SAVE

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