Morning Commentary: Shift4 convertible notes offering eyed as stock weakens early

By Abigail W. Adams

Portland, Me., July 21 – The convertibles primary market returned to action with the first new deal in more than three weeks set to price after the market close.

Shift4 Payments Inc. plans to price $500 million of six-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

The deal was in the market with assumptions of 350 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 1.85 points cheap at the midpoint of talk.

However, with a higher vol. of 45%, the deal looked 3.5 points cheap, another source said.

Shift4’s stock was getting “clocked” on the heels of the new offering.

Stock traded down to $84.88, a decrease of 7.42%, shortly before 11 a.m. ET.

The decline in stock was almost a guarantee that there will be a bounce in the notes on their debut on Thursday, a source said.

Shift4 is a repeat issuer of convertible notes.

In December 2020, the payment processing company priced a $690 million issue of 0% convertible notes due 2025.

With market conditions hot following the 2020 federal election, the company was able to tap into the attractive terms that were becoming commonplace in the convertibles market at the time.

The 2025 notes were initially talked with a coupon of 0.25% to 0.75% and an initial conversion premium of 37.5% to 42.5%.

However, talk tightened to a coupon of 0% to 0.25% and an initial conversion premium of 42.5% to 45%.

While several No-Nos, or 0% convertible bonds that priced at par, have fallen victim to the pullback in equities and underperformed, Shift4 Payment’s 0% convertible notes were not among them.

The high-dollar price bonds were not active early Wednesday but were last seen changing hands at 130.

Even with Tuesday’s decline in stock, the company’s stock has gained more than 50% since the 2025 convertible notes priced.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.