Morning Commentary: Zendesk, Live Nation convertibles hit the market in early trading

By Abigail W. Adams

Portland, Me., March 16 – Friday began with $1 billion of new paper from Zendesk Inc. and Live Nation Entertainment, Inc. hitting the convertibles secondary market. The two new deals accounted for most of the $200 million in trading volume early in the session, a market source said.

Live Nation priced $500 million of five-year convertible senior notes after the market close on Thursday to yield 2.5% with an initial conversion premium of 50%.

Pricing came at the middle of talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 47.5% to 52.5%.

The new 2.5% notes were seen at 102.5 bid with stock at $46.25. They expanded about 0.75-point dollar-neutral, a market source said.

The notes were performing well “given the scarcity in the market segment,” the source said. “I think the market is happy to see some non-tech paper.”

Concurrently with the pricing of the convertible notes, Live Nation priced $300 million of eight-year senior notes to yield 5 5/8%.

Proceeds from the offerings will be used to repurchase the Los Angeles-based events promoter and venue operator’s 2.5% convertible notes due 2019 from time to time.

Live Nation announced Thursday that it had entered into privately negotiated transactions to repurchase $200.7 million of the 2.5% notes due 2019 with a limited number of holders. Prior to the repurchase, there were $275 million of the 2.5% notes outstanding, according to Trace data.

The 2.5% notes due 2019 were seen trading at 137 early in Friday’s session.

Zendesk priced $500 million of five-year convertible notes prior to the market open on Friday with a coupon of 0.25% and an initial conversion premium of 32.5%.

Pricing came at the mid-point of talk for a coupon of 0% to 0.5% and richer than talk for an initial conversion premium of 25% to 30%, according to a market source.

The new 0.25% notes were trading up to 101 out of the gate but dropped back down to par as its equity decreased, a market source said. The San Francisco-based customer service software company’s stock was down to $47.2575, a decrease of 0.71%, early in Friday’s session.

While the secondary market’s focus turned toward new paper from Live Nation and Zendesk, trading activity surrounding Supernus Pharmaceuticals, Inc.’s new 0.625% notes due 2023, which debuted on Thursday, tempered.

Only one print was seen on the tape early in Friday’s session, a market source said.

Supernus’ 0.625% notes were seen trading around 103.5 with stock up about $1, the source said.

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