Wayfair convertibles on tap; Welltower flat on debut; TransMedics, Granite notes soar

By Abigail W. Adams

Portland, Me., May 9 – The convertibles primary and secondary markets were hopping on Tuesday with one new offering set to price after the market close and $1.625 billion in new supply making its aftermarket debut.

Serial issuer Wayfair Inc. plans to price $600 million of five-year convertible notes after the market close on Tuesday in a refinancing of its near-term maturities.

The refinancing deal looked attractive based on underwriters’ assumptions, but the real value will be in the buyback of its outstanding notes, sources said.

Meanwhile, the secondary space was flooded with new paper from Granite Construction Inc., TransMedics Group Inc. and Welltower Inc.

The deals were in hot demand during book building with TransMedics’ and Welltower’s offerings significantly upsized and Granite Construction’s overnight refinancing deal spoken for prior to launching.

While TransMedics’ and Granite Construction’s new notes made large gains on debut, Welltower’s new notes, the latest investment-grade paper to hit the market, fell largely flat.

Wayfair eyed

Wayfair plans to price $600 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 22.5% to 27.5%.

The deal was heard to be in the market with assumptions of a 925 basis points over SOFR and a 45% vol.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of talk, a source said.

While Wayfair’s stock has a “massive” short-interest, the borrow was OK, a source said.

The deal played to strong demand, which was aided by the buyback of its outstanding notes.

Books were heard to have closed in the early afternoon.

The offering is coming as a refinancing with proceeds to be used to repurchase for cash a portion of its 1.125% convertible notes due Nov. 1, 2024, 0.625% convertible notes due 2025 and 1% convertible notes due 2026 in privately negotiated transactions.

The new offering sparked activity in the outstanding notes.

Wayfair’s soon-to-mature 1.125% convertible notes due Nov. 1, 2024 were unchanged in early activity with the notes trading around 91.5.

However, the 1% convertible notes of 2026 improved outright.

The notes gained 1.5 points outright to trade at 70 early in the session.

However, they gave back some early gains as the session progressed and were seen at 69.25 in the late afternoon.

The notes closed the previous session at 67.625.

Wayfair’s stock traded to a low of $36.47 and a high of $38.78 before closing at $36.64, off 8.33%.

Granite Construction gains

Granite Construction priced $325 million of five-year convertible notes after the market close on Monday at par with a coupon of 3.75% and an initial conversion premium of 30%.

Pricing was in line with talk for a fixed coupon of 3.75% and a fixed initial conversion premium of 30%, according to a market source.

The overnight refinancing deal priced shortly after launching with the offering pre-sold largely to holders of the company’s 2.75% convertible notes due Nov. 1, 2024 that participated in the exchange.

Granite Construction entered into privately negotiated transactions to exchange $198.7 million in principal of the 2.75% notes for $198.8 million in cash and 1.39 million shares.

The deal was a “fantastic liability management exercise for the company,” a source said.

Granite Construction was able to retire approximately 86% of its 2024 debt.

Investors also benefited from the attractive terms of the new offering and the deal’s overnight execution.

While overnight executions typically result in a drop in stock due to dilution concerns, it was clear from the exchange that “stock was not for sale,” a source said.

The new paper was putting in a strong performance on its aftermarket debut.

They traded up to 102 early in the session and continued to rise as stock gained steam heading into the afternoon.

The notes were trading at 104.625 about one hour before the market close.

They expanded 1.5 points to 2 points dollar-neutral, sources said.

There was $49 million in reported volume.

Granite Construction’s stock traded to a low of $35.19 and a high of $37.98 before closing at $37.90, an increase of 6.82%.

TransMedics in demand

In a deal that was described as a ‘blowout,’ TransMedics priced an upsized $400 million of five-year convertible notes after the market close on Monday at par with a coupon of 1.5% and an initial conversion premium of 32.5%.

Pricing came richer than talk for a coupon of 1.75% to 2.25% and at the rich end of talk for an initial conversion premium of 27.5% to 32.5%.

The greenshoe was also upsized to $60 million.

The initial size of the offering was $300 million with a greenshoe of $45 million.

“Everyone liked this one,” a source said. “It had the vol.”

The strong demand seen during book building carried over to the secondary space with the notes making large outright and dollar-neutral gains on debut.

The 1.5% notes traded as high as 103.375 out of the gate; however, the majority of trades early in the session were in the 102 to 102.5 context, a source said.

The notes continued to shoot higher as the session progressed and were seen changing hands in the 106.25 to 107 context in the late afternoon.

The notes expanded 3 points dollar-neutral, a source said.

There was $134 million in reported volume.

TransMedics’ stock traded to a low of $70.65 and a high of $76.86 before closing at $75.46, an increase of 6.37%.

Welltower flat

Welltower OP LLC priced an upsized $900 million of five-year notes (Baa1) exchangeable for Welltower Inc. common shares after the market close on Monday at par with a coupon of 2.75% and an initial exchange premium of 25%.

Pricing came at the cheap end of talk for a coupon of 2.25% to 2.75% and at the midpoint of talk for an initial exchange premium of 22.5% to 27.5%, according to a market source.

The initial size of the offering was $750 million with a greenshoe of $112.5 million.

The deal was marketed with assumptions of a 175 bps spread over SOFR and a 26% vol.

While the deal played to solid demand during book building, there were questions about the 26% vol. assumptions used by underwriters, which seemed aggressive, a source said.

The new paper was initially bid up in the gray market, but the initial exuberance wore off with the notes largely flat in the aftermarket.

They were changing hands in the 100.25 to 100.5 context in early trade with the notes moving in line with stock.

The notes were seen in the 100.25 to 100.75 context in the late afternoon.

They were flat dollar-neutral.

There was $188 million in reported volume.

Welltower’s stock traded to a low of $76 and a high of $78.72 before closing at $78.32, up 2.61%.

Mentioned in this article:

Granite Construction Inc. NYSE: GVA

TransMedics Group Inc. Nasdaq: TMDX

Wayfair Inc. NYSE: W

Welltower Inc. NYSE: WELL

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