Zendesk, Live Nation convertibles hit the market, dominate trading; recent deals strong

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 $500 million in trading volume by late afternoon, a market source said.

“The new deals are definitely helping the flow,” 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%.

They expanded about 0.75 point dollar neutral on their debut, a market source said.

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%.

The 0.25% notes wavered between par and 101 early in Friday’s session and were seen wrapped around 101 later in the afternoon, according to market sources.

While new convertible notes from Live Nation and Zendesk were the focus of the secondary market on Friday, recent deals continued to perform well.

Supernus Pharmaceuticals Inc.’s recently priced 0.625% convertible notes due 2023 stayed strong their second day in the market. They were seen wrapped around 105 late in the afternoon with the stock up about 3%.

Helix Energy Solutions Group Inc.’s 4.125% convertible notes due 2023 also continued to perform well. The 4.125% notes, which priced after the market close on Tuesday, were seen trading around 103 with the stock up about 2%.

Deutsche Bank AG, London Branch’s 1% cash-settled equity-linked notes tied to Voya Financial Inc.’s stock, which made their market debut March 9, continued to trade north of 103 on Friday with the threshold price for the notes now established.

Live Nation

While new notes from both Live Nation and Zendesk were in focus on Friday, Live Nation performed better in the secondary market, a market source said.

Live Nation’s 2.5% notes due 2023 priced 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 the stock at $46.25 early in the session. 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.”

The notes continued to trade in the 102.5 range later in the afternoon. “Some big players are creating positions,” a market source said.

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.

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 on Friday.

Zendesk

Zendesk’s 0.25% convertible notes due 2023 priced prior to the market open Friday 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 0.25% notes were seen wrapped around 101 later in the afternoon.

The San Francisco-based customer service software company’s stock closed Friday at $46.92, a decrease of 1.43%.

While the new paper from both Zendesk and Live Nation were expected to perform well, market sources pointed to Live Nation as the better deal.

Supernus day two

Trading activity surrounding Supernus’ new 0.625% notes due 2023, which debuted on Thursday, tempered on Friday.

Only one print was seen on the tape early in Friday’s session, a market source said. However, the new notes continued to perform well.

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

The 0.625% notes traded up to 105 later in the afternoon. Supernus stock closed the day at $44.70, an increase of 3.53%.

“It’s still doing well,” a market source said. “It was the only biotech deal of the week.”

Helix day three

New notes from Helix also continued to perform well their third day in the market, although trading activity surrounding the notes also tempered. The 4.125% notes due 2023 continued to trade north of 103 on Friday.

Helix’s stock was up on Friday, closing the day at $6.14, an increase of 1.99%. Proceeds from the convertible notes offering were used, in part, to repurchase the company’s outstanding 3.25% convertible notes due 2032.

Helix announced a put option on the 3.25% notes on Feb. 14, which expired on Thursday. The Houston-based oil and gas services company announced Friday that holders of $59.306 million of the principal amount of the 3.25% notes had exercised the put option, leaving $809,000 outstanding.

If the put option is not exercised, Helix may call the remaining amount, Prospect News reported. The 3.25% notes were last seen trading between 98 to 99 in late February.

Deutsche’s threshold

Deutsche Bank’s 1% cash-settled equity-linked notes due 2023 tied to Voya Financial also continued to trade north of 103 in scattered trading activity on Friday.

With the averaging period over, a threshold price of $69.83790, representing a 30% premium over the initial price of $53.72146 was established on Friday, Prospect News reported.

Meanwhile, JPMorgan Chase Financial Co. LLC’s 0.25% cash-settled equity-linked notes due 2023 tied to Voya Financial continued to trade just north of par on Friday.

While the 0.25% notes traded up to 104 the first week of March, they dropped to just above par when Deutsche announced its deal.

JPMorgan’s 0.25% notes have a threshold price of $67.68198, which is a 32.5% premium over the initial reference price of $51.08074, which was also established after a five-day averaging period.

Mentioned in this article:

Live Nation Entertainment, Inc. NYSE: LYV

Helix Energy Solutions Group Inc. NYSE: HLX

Supernus Pharmaceuticals, Inc. Nasdaq: SUPN

Voya Financial Inc. NYSE: VOYA

Zendesk, Inc. NYSE: ZEN

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