Morning Commentary: Bill.com, RBC Bearings convertible notes offerings focus of market

By Abigail W. Adams

Portland, Me., Sept. 21 – The convertibles primary market remained active heading into the final stretch of the third quarter with two deals set to price after the market close.

RBC Bearings Inc. plans to price $400 million par-of-$100 three-year mandatory convertible preferred stock and Bill.com Holdings Inc. plans to price $500 million of six-year convertible notes after the market close on Tuesday.

The offerings are part of large capital raises with both deals pricing concurrently with secondary offerings.

RBC Bearings in focus

RBC Bearings plans to price $400 million par-of-$100 three-year mandatory convertible preferred stock after the market close on Tuesday with price talk for a dividend of 5% to 5.5% and an initial conversion premium of 20% to 25%, according to a market source.

The deal was heard to be in the market with assumptions of 500 basis points over Libor and a 30% to 27% vol. skew.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of talk, a source said.

The deal is part of a large capital raise to fund the company’s acquisition of ABB’s Dodge Mechanical Power Transmission Business.

Concurrently, the company is pricing a secondary offering of 3 million shares of common stock.

In addition, Roller Bearing Co. of America Inc., a subsidiary, may also price a $500 million offering of senior notes.

Bill.com eyed

Bill.com plans to price $500 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.25% and an initial conversion premium of 45% to 50%, according to a market source.

The deal was heard to be in the market with assumptions of 250 bps over Libor and a 42% vol.

Using those assumptions, the deal looked 1.14 points cheap at the midpoint of talk, a source said.

The financial services software company is a repeat issuer of convertible notes and priced a $1.15 billion offering of 0% convertible notes due 2025 in November 2020.

The outstanding convertible notes were down about 7 points outright with stock off about 7%.

They were changing hands at 179.125 versus a stock price of $268.76 early in the session.

Bill.com’s stock was changing hands at $263.02, a decrease of 7.26% shortly before 11 a.m. ET.

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