NiSource, Bally’s equity units eyed; DraftKings active; Spotify, MicroStrategy up outright

By Abigail W. Adams

Portland, Me., April 13 – It was shaping up to be the week of the mandatory with the forward calendar populated by equity units offerings.

Bally’s Corp. plans to price $250 million of three-year par-of-$50 equity units after the market close on Thursday and NiSource Inc. plans to sell $750 million of three-year par-of-$100 equity units after the market close on Tuesday.

While mandatories do not appeal to certain sources, other market players find them very attractive.

“There’s much to be said for mandatories,” a source said.

The equity units have the highest yields in the convertibles market and good liquidity due to the fact they’re registered and available to retail investors, the source said.

However, the poor performance of some recent mandatories is still fresh in the minds of some market players, another source said.

As market players eyed the new deals in the works, there was an uptick of activity in the secondary space.

There was $594 million in reported volume during Tuesday’s session with several recent issues improving on an outright basis.

Spotify Technology SA’s 0% exchangeable notes due 2026 and MicroStrategy Inc.’s 0% convertible notes due 2027 were both up on an outright basis as stock improved.

However, both issues remained firmly below par.

DraftKings Inc.’s 0% convertible notes due 2028 were also active although largely unchanged during Tuesday’s session.

Bally’s on deck

Bally’s plans to price $250 million of three-year par-of-$50 equity units and after the market close on Thursday with price talk for a dividend of 6% to 6.5% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The units consist of a stock purchase contract and an amortizing note due April 15, 2024.

The equity units were heard to be in the market with assumptions of 400 basis points over Libor and a 50% to 45% vol. skew, according to a market source.

Using those assumptions, the deal looked 2.52 points cheap at the midpoint of talk, a source said.

Concurrently, the company plans to price a secondary offering of $600 million shares.

The long marketing period was a result of the secondary offering.

The deal is a part of the casino operator and gaming company’s financing to acquire Gamesys Group for $2.7 billion.

NiSource looks cheap

NiSource plans to price $750 million of three-year par-of-$100 equity units after the market close on Tuesday with price talk for a yield of 7.25% to 7.75% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The deal was being marketed with assumptions of 75 bps over Libor and a 23% to 21% vol. skew.

Using those assumptions, the deal looked 3.51 points cheap at the midpoint of talk, a source said.

The company is rated investment grade.

While some sources questioned the actual quality of the credit, the offering looked attractive, sources said.

Outright gains

Spotify’s 0% exchangeable notes due 2026 and MicroStrategy’s 0% convertible notes due 2027 were both posting gains on an outright basis during Tuesday’s session, although both issues continued to trade below par.

Spotify’s 0% notes were up 1.25 points with stock up more than 5%.

They were changing hands at 96.25 versus a stock price of $293.26 heading into the market close. There were more than $12 million of the bonds on the tape during Tuesday’s session.

Spotify’s stock traded to a low of $278.50 and a high of $294.22 before closing the day at $293.12, an increase of 5.91%.

MicroStrategy’s 0% convertible notes due 2027 were up more than 5.5 points outright with stock up more than 18%.

The notes were changing hands at 90.625 versus a stock price of $831 in the late afternoon, according to a market source.

There was more than $12 million in reported volume.

MicroStrategy’s stock traded to a low of $734.79 and a high of $869.99 before closing the day at $848.54, an increase of 18.14%.

Stock was on the rise alongside Bitcoin, which set a new all-time high of $63,774.39 in intraday activity ahead of Coinbase’s highly anticipated direct listing on Wednesday.

While MicroStrategy’s stock surged on Tuesday, the 0% convertible notes priced versus a stock price of $955 in mid-February.

DraftKings flat

DraftKings’ 0% convertible notes due 2028 were active although largely flat during Tuesday’s session, despite gains in the company’s stock.

The 0% convertible notes were changing hands at 97 versus a stock price of $59.26 heading into the market close.

They were contracted about 0.125 point dollar-neutral, a source said.

There was more than $14 million of the bonds on the tape.

DraftKings’ stock traded to a low of $56.82 and a high of $59.49 before closing the day at $59.24, a decrease of 2.09%.

Mentioned in this article:

Bally’s Corp. NYSE: BALY

DraftKings Inc. Nasdaq: DKNG

MicroStrategy Inc. Nasdaq: MSTR

NiSource Inc. NYSE: NI

Spotify USA Inc. NYSE: SPOT

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