Convertibles primary set to price $2.3 billion over five deals in busiest day of year

By Abigail W. Adams

Portland, Me., May 7 – There was a “blizzard” of activity from the convertibles primary market on Thursday, which saw its busiest day year to date, according to market sources and data compiled by Prospect News.

There is $2.3 billion in five deals set to price after the market close, one deal that is being remarketed and one new deal that made its aftermarket debut on Thursday.

Danaher Corp. plans to price $1.25 billion of three-year par of $1,000 series B mandatory convertible preferred stock, Huazhu Group Ltd. plans to price $450 million of six-year convertible notes, National Vision Holdings Inc. plans to sell $350 million of five-year convertible notes, Spirit Airlines Inc. plans to price $150 million of five-year convertible notes and Inseego Corp. plans to price $100 million of five-year convertible notes after the market close on Thursday.

“We’re getting saturated,” a market source said.

In addition, Stanley Black & Decker, Inc. announced it is remarketing an offering of $750 million of its par of $1,000 series C cumulative perpetual convertible preferred stock, which were originally issued on May 17, 2017.

Meanwhile, Varonis Systems Inc.’s newly priced 1.25% convertible notes due Aug. 15, 2025 made their secondary market debut.

The notes dominated activity in the secondary space and saw a slight dollar-neutral expansion although they were largely flat on an outright basis.

Danaher’s mandatories

Danaher plans to price $1.25 billion of three-year par of $1,000 series B mandatory convertible preferred stock after the market close on Thursday with price talk 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.

Concurrently with the mandatory convertible preferreds, the company will price a secondary offering of up to $1.25 billion of common stock.

The offering is the second mandatory deal of the week.

The $1,000 liquidation preference is slightly unusual and will discourage retail investors, a market source said.

However, the Washington D.C.-based diversified conglomerate is a solid blue-chip company and the offering is expected to go well, sources said.

Inseego’s exchange

Inseego plans to price $100 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 2.75% to 3.25% and an initial conversion premium of 20% to 25%, according to a market source.

In addition, Golden Harbor Ltd. and North Sound trading LP will exchange an aggregate principal amount of $44,816,000 of the company’s 5.5% notes due 2022 for cash and $75 million of the new notes.

Following the exchange, the 5.5% notes due 2022 will have $152 million outstanding.

Huazhu Group on deck

Huazhu Group plans to price $450 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 30% to 35%, according to a market source.

Proceeds from the offering will be used, in part, to repurchase the company’s 0.375% convertible notes due 2022.

The Shanghai-based hotel management company’s 0.375% convertible notes last traded at 99.375 on Wednesday.

The 0.375% notes currently have $475 million outstanding, according to Trace data.

National Vision seen cheap

National Vision Holdings plans to sell $350 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 2.5% to 3% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

The deal was heard to be in the market with assumptions of 900 bps over Libor and a 40% vol., which modeled about 4.5 points cheap at the midpoint of talk.

The offering from the Duluth, Ga.-based optical retailer had “some hair on it,” with store closures due to the coronavirus pandemic, a source said.

However, the company also has an online presence.

Spirit Airlines wall-crossed

Spirit Airlines 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.

Concurrently with the convertible notes offering, the company will price a secondary offering of 12 million shares of common stock.

The deal was wall-crossed, a source said.

Varonis in focus

Varonis Systems brought an upsized $220 million convertible notes due Aug. 15, 2025 after the market close on Wednesday at par at the midpoint of talk with a coupon of 1.25% and an initial conversion premium of 30%.

Price talk was for a coupon of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The greenshoe was also upsized to $33 million.

The initial size of the offering was $175 million with a greenshoe of $26.25 million.

The new paper dominated activity in the secondary space.

The notes traded as high as 102.5 when stock spiked in intraday trading. However, the notes traded back down to par as stock came in.

The notes traded up 1 point dollar-neutral in intraday trading.

However, they also came in on a dollar-neutral basis. The notes were expanded about 0.25 point to 0.5 point dollar-neutral heading into the market close, a source said.

With more than $77 million in reported volume about one hour before the market close, the notes were the most actively traded in the secondary space.

Varonis stock traded to a high of $71.95 and a low of $70.51 before closing the day at $71.56, an increase of 0.99%.

Mentioned in this article:

Danaher Corp. NYSE: DHR

Huazhu Group Ltd. Nasdaq: HTHT

National Vision Holdings Inc. Nasdaq: EYE

Spirit Airlines Inc. NYSE: SAVE

Stanley Black & Decker, Inc. NYSE: SWK

Varonis Systems Inc. Nasdaq: VRNS

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