Winnebago convertibles play to strong demand; BrightSpring on deck; BridgeBio active

By Abigail W. Adams

Portland, Me., Jan. 18 – The convertibles primary market continued to roll out deals at a steady pace with one deal set to price after the market close on Thursday and one more on the calendar for next week.

Winnebago Industries Inc. plans to price $300 million of six-year convertible notes after the market close on Thursday, and BrightSpring Health Services Inc. is on the calendar with a $400 million offering of $50-par three-year tangible equity units.

Winnebago’s convertible notes offering looked cheap based on underwriters’ assumptions and, with a portion of proceeds used to repurchase its outstanding convertible notes, is expected to do well.

BrightSpring’s equity units are pricing concurrently with its IPO making valuation difficult. However, the offering was more of a mechanism to bypass restrictions on the amount that can be raised in an IPO, a source said.

While market players eyed the deals on deck with the market hungry for new paper, topical news continued to move the secondary space.

Equity indexes were mixed at the open with the Dow Jones industrial average the laggard but saw a strong finish.

The Dow closed Thursday up 202 points, or 0.54%, the S&P 500 index closed up 0.88%, the Nasdaq Composite index closed up 1.35% and the Russell 2000 index closed up 0.49%.

There was $71 million in reported convertible trading volume about one hour into the session and $511 million on the tape in the late afternoon.

BridgeBio Pharma, Inc.’s convertible notes were volatile in active trading after the company secured $1.25 billion in private financing.

Spirit Airlines, Inc.’s 1% convertible notes due 2026 continued to see selling pressure with the company exploring options to shore up its balance sheet after the failure of its JetBlue merger.

Winnebago eyed

Winnebago Industries plans to price $300 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 375 basis points over SOFR and a 33% vol.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of talk, a source said.

The offering is the latest refinancing to come to market with proceeds to be used to repurchase a portion of the company’s 1.5% convertible notes due 2025 in privately negotiated transactions.

The deal was heard to be playing to strong demand with talk tightening to a coupon of 3% to 3.25% and an initial conversion premium of 30% to 32.5%, a source said.

BrightSpring on tap

BrightSpring plans to price the first mandatory convertible deal of the year with the company offering $400 million of $50-par three-year tangible equity units concurrently with its IPO.

Pricing is expected after the market close on Jan. 25.

The tangible equity units are talked with a dividend of 6.25% to 6.75% and a threshold appreciation premium of 17.5% to 22.5%.

The tangible equity units are being marketed with assumptions of 600 bps over SOFR and a 40% to 37% vol. skew.

However, with no history as a public company, the vol. assumptions are meaningless, a source said.

“They haven’t got a clue,” the source said.

The tangible equity unit offering is most likely a method of bypassing capital raise restrictions on the IPO, sources said.

BridgeBio rises

BridgeBio’s convertible notes were volatile in active trade on Thursday after the company announced a capital infusion of $1.25 billion in private financing deals.

The biopharma’s 2.25% convertible notes due 2029 gained 2 points outright with stock up 8% in early trade.

However, they gave back their gains to close the day largely unchanged.

The 2.25% notes were trading at 86.25 early in the session, according to a market source.

They were changing hands at 84.25 versus a stock price of $36.92 in the late afternoon.

There was $17 million in reported volume.

BridgeBio’s 2.5% convertible notes due 2027 were seen at 120.375 early in the session.

They were marked at 118 in the afternoon.

There was $12 million in reported volume.

BridgeBio’s stock traded to a low of $36.32 and a high of $40.65 before closing at $37.56, up 1.76%.

The company was in focus after it announced two new financing transactions.

BridgeBio will receive $500 million from Blue Owl Capital and the Canada Pension Plan Investment Board in exchange for 5% royalties on the global sales of a product pending FDA approval.

It also entered into a refinancing deal with Blue Owl for $450 million that will extend the maturity of its senior credit facility to 2029 from 2026.

Blue Owl will also provide up to $300 for additional facilities to support the expansion of the biopharma’s pipeline.

Spirit Airlines lower

Spirit Airlines’ 1% convertible notes due 2026 continued to move lower in heavy volume on Thursday with the company exploring its options after its failed merger with JetBlue.

The 1% notes were off another 6 to 7 points adding to their already 32-point decline over the past two sessions.

The 1% notes were seen trading at 27.25 in the late afternoon with the yield now about 67.25%, a source said.

There was $18 million in reported volume.

While not equity sensitive, Spirit Airlines’ stock continued to hit new lows and closed the day at $5.70, a decrease of 7.17%.

The company was heard to be working with advisers to explore options on how to shore up its balance shees after a federal judge blocked Spirit Airlines and JetBlue’s merger on Tuesday.

Mentioned in this article:

BridgeBio Pharma, Inc. Nasdaq: BBIO

Spirit Airlines, Inc. NYSE: SAVE

Winnebago Industries Inc. NYSE: WGO

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