Morning Commentary: Booking Holdings, Health Catalyst convertible offerings in focus

By Abigail W. Adams

Portland, Me., April 8 – The convertibles primary market continued to roll out overnight deals on Wednesday with two expected to price after the market close.

Health Catalyst Inc. plans to price $175 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 2.5% to 3% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

The deal was heard to be marketed with assumptions of 800 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 5.36 points to 5.5 points cheap at the midpoint of talk, sources said.

However, the borrow on the stock is tough with the borrow rate negative 0.6%, sources said.

Booking Holdings Inc. plans to price $750 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%.

Using assumptions of 375 bps over Libor and a 35% vol., the deal modeled about 4.43 points cheap at the midpoint of talk, a market source said.

However, another source pegged assumptions as a credit spread of 400 bps over Libor and a 40% vol.

Using those assumptions, the deal modeled almost 6.5 points cheap at the midpoint of talk.

Booking is also pricing a three-tranche offering of senior notes in the investment-grade primary market with the five-year tranche pricing with a spread of 400 bps over Treasuries, a source said in explanation of the wider spread.

Investment-grade credit spreads have widened considerably since mid-March, the source said.

While the primary market prepped Booking’s new offering, the travel fare aggregators’ outstanding convertible notes were active.

Booking’s 0.9% convertible notes due 2021 were changing hands at 99.25 with more than $10 million in reported volume, a market source said.

The soon-to-mature 0.35% convertible notes due 2020 were trading at 109.75 with about $3 million in reported volume.

Holders were most likely getting out of the old convertible notes and buying into Booking’s new offerings, a source said.

Proceeds from Booking’s new convertible notes offering will be used for the repayment of debt including the outstanding convertible notes upon their conversion or maturity.

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