LendingTree’s new 0.625% convertibles do well on debut; ServiceNow a dud; PRA Group edges up

By Stephanie N. Rotondo

Seattle, May 25 – Convertible bond investors continued to focus on newly priced issues in Thursday trading.

In particular, LendingTree Inc.’s new $265 million issue of 0.625% convertible notes due 2022 performed well upon the break.

“Given the deal was upsized, it did very well,” said one trader.

That trader said the new issue was at 103 in pre-market trading, though he noted that the convertibles eventually backed off to a 102.125 to 102.625 context.

Another trader also said the paper “did very well,” seeing the notes hitting a high of 103 but ending closer to 102.25 bid, 102.5 offered.

The trader said that “guys like the credit,” which at a stock price of $150-plus was “better than the average convert.”

“The downside is limited,” he added.

The trader also noted that the new issue made up a bulk of the day’s trading volume.

The underlying equity was gyrating in early dealings, finishing slightly lower at $155.85.

The deal came upsized from $200 million. Pricing on the yield side was in middle of the 0.5% to 1% talk, and the initial conversion premium of 32.5% was at the rich end of the 27.5% to 32.5% talk.

BofA Merrill Lynch, Goldman Sachs & Co., RBC Capital Markets and SunTrust Robinson Humphrey Inc. ran the books.

The conversion rate is 4.8163 shares per each $1,000 of notes, or $207.63 a share.

Prior to Feb. 1, 2022, the bonds are contingently convertible if the stock hits a 130% price hurdle. After that date, the paper can be converted at any time.

Proceeds will be used, in part, to cover the cost of hedging transactions. The remaining funds will be used for general corporate purposes, including working capital and potential acquisitions.

Meanwhile, ServiceNow Inc.’s $750 million of 0% five-year convertible notes – a deal priced late Tuesday – were not garnering much interest, according to a trader.

Toward the end of the day, the 0% convertibles were pegged at 100.75 bid, 101 offered.

At mid-morning, the bonds were seen at 100.625.

The company’s shares were up nearly 1% in early trading and closed even better, rising $1.51, or 1.47%, at $104.51.

The deal broke on Wednesday but failed to gain much traction. A market source said it was because the issue was priced too aggressively.

The deal came with an initial conversion premium of 32.5%.

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and RBC were the bookrunners.

As for other deals from the week, PRA Group Inc.’s $300 million of 3.5% convertible notes due 2023 were deemed a touch better on the day, as the company’s equity improved.

A trader said the bonds traded in a 101 to 101.5 range, which he said was a gain of 0.25 point to 0.375 point.

The stock firmed 95 cents, or 2.73%, to $35.70.

PRA brought the deal on Tuesday with an initial conversion premium of 35%. Pricing came in the middle of the 3.25% to 3.75% yield talk, as well as in the middle of the 32.5% to 37.5% premium talk.

BofA Merrill Lynch and SunTrust Robinson Humphrey led the deal.

Mentioned in this article:

LendingTree Inc. Nasdaq: TREE

PRA Group Inc. Nasdaq: PRAA

ServiceNow Inc. NYSE: NOW

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