Spirit Airlines, Varonis eyed; Bloomin’ Brands, Norwegian Cruise Line, Southwest active

By Abigail W. Adams

Portland, Me., May 6 – The new deal pipeline for convertibles continued on Wednesday with one overnight offering set to price after the market close, one on deck for after the market close on Thursday and two new deals making their aftermarket debut.

Spirit Airlines Inc. plans to price $150 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 4.5% to 5% and an initial conversion premium of 25% to 30%, according to a market source.

Citigroup Global Markets Inc, Morgan Stanley & Co. LLC, Barclays, and Deutsche Bank Securities Inc. are joint bookrunners for the registered offering, which carries a greenshoe of $22.5 million.

Varonis Systems Inc. plans to price an offering of convertible notes due Aug. 15, 2025 after the market close on Wednesday.

The deal was heard to be in demand during bookbuilding with the deal upsizing.

Meanwhile, new paper from NCL Corp. Ltd., a subsidiary of Norwegian Cruise Line Holdings Ltd., and Bloomin’ Brands Inc. hit the secondary space.

While the new paper from Norwegian Cruise Line was performing well on an outright and dollar-neutral basis, Bloomin’ Brands’ new convertible notes were volatile and fell flat dollar-neutral.

The new paper was in focus in the secondary space, which was again active with $900 million in reported volume about one hour before the market close.

Outside of the new deals, Southwest Airlines Co.’s 1.25% convertible notes due 2025 continued to weaken with the notes dropping below par and continuing to come in on an outright basis in high-volume activity.

Varonis in focus

Varonis Systems plans to price an offering of convertible notes due Aug. 15, 2025 after the market close on Wednesday with price talk for a coupon of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

While the deal “was not a screamer,” it was heard to be doing well during bookbuilding, another source said.

It was heard to have been upsized to $220 million from the initially announced $175 million with pricing believed to be coming at the midpoint of talk.

Using a credit spread of 700 basis points over Libor and a 45% vol., the deal looked almost 3 points cheap at the midpoint of talk, a source said.

While tech companies like Varonis typically have a credit spread of 350 bps over Libor, the source opted for a more conservative credit spread given the market environment and the spreads that comparable companies were trading with.

The convertible notes offering comes on the heels of the data security and analytics company’s first-quarter earnings.

Varonis beat analyst expectations on both the top and bottom lines with a quarterly loss of 56 cents a share on revenue of $54.18 million.

Norwegian Cruise active

NCL Corp., a subsidiary of Norwegian Cruise Line, priced an upsized $750 million of four-year exchangeable notes after the market close on Tuesday at par with a coupon of 6% and an initial exchange premium of 25%.

Pricing came at the midpoint of talk for a coupon of 5.75% to 6.25% and at the rich end of talk for an initial exchange premium of 20% to 25%, according to a market source.

Concurrently with the convertible notes offering, the company also priced an upsized offering of $675 million 12¼% senior secured notes due 2024 at 99 to yield 12.575% and a secondary offering of 36,363,636 common shares, which priced at $11.00 per share.

The convertible notes traded up on an outright basis and dollar-neutral basis.

The notes were seen at 104 prior to the market open and were up 4 points dollar-neutral, sources said.

The 6% notes traded as high as 106 with stock up in intraday trading.

However, the notes came in about 1 point on a dollar-neutral basis on the move up, a market source said.

The 6% notes also came in outright as stock gave back its intraday gains.

They were marked at 103.5 bid, 104.25 offered in the late afternoon.

The notes closed the day up 3 points dollar-neutral, a source said.

Norwegian Cruise Line’s new notes dominated activity in the secondary space with more than $368 million in reported volume about one hour before the market close.

Norwegian Cruise stock traded as high as $11.94 and as low as $10.88 before closing the day at $11.12, a decrease of 0.63%.

Bloomin’ Brands volatile

Bloomin’ Brands priced $200 million of five-year convertible notes after the market close on Tuesday at par at the cheap end of talk with a coupon of 5% and an initial conversion premium of 25%.

Price talk was for a coupon of 4.5% to 5% and an initial conversion premium of 25% to 30%, according to a market source.

The notes were volatile on their aftermarket debut.

They were quoted as low as 97 bid pre-open. However, they bounced back with stock up early in Wednesday’s session.

The notes were changing hands between 100.25 and 100.75 early Wednesday.

However, they rallied alongside stock in intraday trading and climbed to a 102-handle.

They also came in as stock gave back its gains and were again trading around 100.25 in the late afternoon.

The notes were largely unchanged dollar-neutral, a market source said.

The 5% notes saw $28.5 million in reported volume in the late afternoon.

Bloomin’ Brands stock traded as high as $10.09 and as low as $9.42 before closing the day at $9.59, an increase of 0.84%.

Southwest Airlines dips

Southwest Airlines’ 1.25% convertible notes due 2025 continued to weaken on Wednesday with the notes dropping below par.

The 1.25% notes traded as low as 98 in high-volume activity.

They continued to come in on a dollar-neutral basis as well, a market source said.

The notes saw more than $84 million in reported volume.

The 1.25% notes reached as high as 110 on their secondary market debut on April 29.

“It’s not too often you see an (investment-grade) company go from 110 to 98,” a source said.

And it is even more rare to see no expansion on the move down.

Stock traded to a high of $26.74 and a low of $24.77 before closing the day at $24.93, a decrease of 5.68%.

Southwest’s convertible notes and stock were continuing to feel the effect of Warren Buffet’s vote of no confidence in the airline industry, a source said.

Mentioned in this article:

Bloomin’ Brands Inc. Nasdaq: BLMN

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH

Southwest Airlines Co. NYSE: LUV

Varonis Systems Inc. Nasdaq: VRNS

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