Morning Commentary: Chegg’s new convertibles dominate secondary; GOL Linhas prices

By Abigail W. Adams

Portland, Me., March 22 – While convertibles primary market activity has been muted for much of the week, it leapt back into action with two deals totaling $900 million pricing prior to the market open.

Chegg Inc. priced an upsized $700 million of six-year convertible notes prior to the market open on Friday at par with a coupon of 0.125% and an initial conversion premium of 30%, according to a market source.

Pricing came at the rich end of talk for a coupon of 0.125% to 0.625% and at the midpoint of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The greenshoe was also upsized to $100 million.

The initial size of the deal was $500 million with a greenshoe of $75 million.

The new paper dominated activity in the secondary space, accounting for $76 million of the $122 million on the tape about one hour into Friday’s session.

The notes were up to 101 prior to the open but dropped below par with stock off early in the session, a market source said. The notes were trading in a range of 99 to par early on Friday.

Chegg stock was $38.35, a decrease of 3.3% shortly before 11 a.m. ET.

While Chegg’s new convertible notes dominated activity in the secondary space, the online textbook rental, tutoring, scholarship and internship matching company were also active.

Chegg’s 0.25% convertible notes due 2023 traded down to 154.25 early Friday with about $5 million on the tape.

GOL Linhas Aereas Inteligentes SA priced $300 million five-year exchangeable notes prior to the market open on Friday at par with a coupon of 3.75% and an initial exchange premium of 35%, according to a company news release.

Pricing came at the rich end of revised price talk for a coupon of 3.75% to 3.875% and an initial exchange premium of 35%, according to a market source.

Initial price talk was for a coupon of 3.75% to 4.25% and an initial exchange premium of 30% to 40%, according to a market source.

The new paper was not seen on Trace early in the session, a market source said.

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