Morning Commentary: Burlington Stores, Sabre, Natera convertible note offerings eyed

By Abigail W. Adams

Portland, Me., April 13 – The convertibles primary market began the week in high gear with three overnight deals launching.

Burlington Stores Inc. plans to price $700 million of five-year convertible notes, Natera Inc. plans to price $250 million in seven-year convertible notes and Sabre Corp. plans to sell $250 million of five-year exchangeable notes after the market close.

The offerings looked cheap based on underwriters’ assumptions, sources said.

“They’re starting to price them cheaper to get them out the door,” a source said.

Burlington looks cheap

Burlington Stores plans to price $700 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal was being marketed with assumptions of 600 basis points over Libor and a 35% vol., according to a market source.

Using those assumptions, the deal looked almost 5 points cheap at the midpoint of talk.

The department store retailer also plans to price $300 million senior secured notes due 2025 with price talk for a yield of 7% to 7¼%.

The company also announced Monday that it furloughed nearly all of its store and distribution center employees, the CEO will forgo compensation and executive leaders will take up to a 50% pay cut.

Natera eyed

Natera plans to sell $250 million of seven-year convertible notes after the market close on Monday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal was being marketed with assumptions of 800 bps over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked 3.6 points cheap at the midpoint of talk, a source said.

Sabre’s exchangeables

Sabre plans to price $250 million of five-year exchangeable notes after the market close on Monday with price talk for a coupon of 4.5% to 5% and an initial exchange premium of 22.5% to 27.5%, according to a market source.

The notes will be issued by subsidiary Sabre GLBL Inc. and exchangeable for Sabre Corp. common stock.

The deal was being marketed with assumptions of 1,200 bps over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked almost 7 points cheap at the midpoint of talk, a source said.

However, despite how wide the credit spread was, some sources felt it could be even wider given that the software and technology company serving the global travel industry isn’t even a business right now.

Concurrently with the convertible notes, Sabre plans to price $500 million of five-year secured notes.

The offerings were rescue financing, a source said.

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