Morning Commentary: T-Mobile mandatories price, skyrocket on debut in early trading

By Abigail W. Adams

Portland, Me., June 24 – While the convertibles primary market was quiet early in Wednesday’s session with no deals launching prior to the market open, the June 22 week is still in the running for the highest volume week year to date with $1.86 billion pricing after the market close on Tuesday and a $1.5 billion offering on the forward calendar.

The 2020 Cash Mandatory Exchangeable Trust priced a downsized $1.86 billion par of $1,000 three-year cash-settled mandatory securities tied to T-Mobile US, Inc. stock after the market close on Tuesday.

While the deal was downsized, the offering was in demand and the notes skyrocketed in the secondary.

Meanwhile, PG&E Corp. remains on deck with its $1.5 billion offering of $100-par three-year equity units, which are slated to price after the market close on Thursday.

T-Mobile in demand

The 2020 Cash Mandatory Exchangeable Trust priced a downsized $1.86 billion par of $1,000 three-year cash-settled mandatory securities tied to T-Mobile stock after the market close on Tuesday.

Pricing came at the rich end of talk with a dividend of 5.25% and a threshold appreciation premium of 22.5%.

Price talk was for a dividend of 5.25% to 5.75% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The deal was launched as a $3.2 billion offering, which included a 7.5% greenshoe.

While the mandatory offering was downsized, the concurrent equity offering was upsized.

T-Mobile priced a secondary offering of 143.39 million shares at $103.00 per share.

The initial size of the secondary offering was 133,548,303 shares.

There was strong demand for both the mandatory and equity offerings with the mandatory notes oversubscribed at the midpoint of talk, a source said.

However, the company opted to price at the rich end and shift proceeds to the common stock offering.

“Demand for the stock offering was crazy,” the source said.

T-Mobile stock also broached an all-time high in intraday trading on Tuesday.

Net proceeds from the common stock offering will be used by T-Mobile to repurchase an equal number of shares from a SoftBank Group Corp.

Proceeds from the exchangeable trust offering will also go to SoftBank with the securities part of SoftBank’s efforts to monetize a portion of its stake in T-Mobile.

Investors were enamored with the T-Mobile story and jumped at the chance to own equity in the company, a source said.

There are high hopes for the company’s prospects following its merger with Sprint.

The 5.25% notes skyrocketed out of the gate. They were marked at 104 bid, 104.5 offered soon after the opening bell, a source said.

The notes continued to trade around 104.25 with T-Mobile stock around $106 shortly before 11 a.m. ET.

The notes expanded at least 4 points dollar-neutral, a market source said.

If they were hedged off of T-Mobile’s closing price of $107.16 on Tuesday, the notes expanded an additional 0.75 point, the source said.

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