Marriott, Two Harbors on deck; BridgeBio, Sunrun in focus, trade up; Alarm.com active

By Abigail W. Adams

Portland, Me., Jan. 26 – The convertibles primary market continued to churn out new offerings on Tuesday with two new deals launching.

Two Harbors Investment Corp. plans to price $250 million of five-year convertible notes and Marriott Vacations Worldwide Corp. plans to price $500 million of five-year convertible notes after the market close on Wednesday.

Meanwhile, new paper from BridgeBio Pharma Inc. and Sunrun Inc. made their aftermarket debut on Tuesday.

The deals were in demand during bookbuilding and in the secondary space where they both were trading up on an outright and dollar-neutral basis.

Outside of the new paper, the secondary space was relatively quiet on Tuesday.

There was $768.5 million on the tape heading into the market close with BridgeBio and Sunrun accounting for almost ¼ of the total volume on the tape.

Alarm.com’s recently priced 0% convertible notes due 2026 were active with the notes making gains on an outright basis as stock sold off.

The calendar

The calendar remained full on Tuesday with two deals launching after the market close.

In a cross-over trade, Marriott Vacations, a frequent high-yield issuer, will make its debut appearance in the convertibles market with a $500 million offering of five-year convertible notes.

Price talk is for a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

J.P. Morgan Securities LLC and BofA Securities Inc. are active bookrunners for the Rule 144A offering, which carries a greenshoe of $75 million.

Two Harbors plans to price $250 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

J.P. Morgan Securities LLC and Barclays are active bookrunners for the registered offering, which carries a greenshoe of $37.5 million.

BridgeBio in demand

BridgeBio priced an upsized $650 million of eight-year convertible notes after the market close on Monday at par with a coupon of 2.25% and an initial conversion premium of 47.5%.

Pricing came in line with tightened talk for a fixed coupon of 2.25% and at the rich end of tightened talk for an initial conversion premium of 42.5% to 47.5%.

Initial price talk was for a coupon of 2.25% to 2.75% and an initial conversion premium of 32.5% to 37.5%.

The deal was met with heavy demand during bookbuilding and was as much as 4x oversubscribed, a source said.

The demand followed the notes into the secondary space.

The notes traded as high as 103.5 early in the session but drifted down alongside stock and were changing hands between 101.5 and 102 about one hour after the opening bell.

They continued to trade in that range throughout the session and were changing hands at 101.75 versus a stock price of $63.03 in the late afternoon, sources said.

The convertibles expanded 3 to 4 points on a dollar-neutral, or hedged, basis, early in the session, a source said.

Another source saw them up 2.5 points dollar-neutral in the late afternoon.

There was more than $116 million of the bonds on the tape.

BridgeBio’s stock traded to a high of $65.91 and a low of $60.28 before closing the day at $62.33, a decrease of 5.26%.

Sunrun’s run

Sunrun priced $350 million of five-year convertible notes after the market close on Monday at par with a coupon of 0% and an initial conversion premium of 50%, according to a company news release.

Pricing came at the rich end of initial price talk for a coupon of 0% to 0.5% and richer than initial talk for an initial conversion premium of 42.5% to 47.5%.

The notes skyrocketed on debut.

They traded as high as 106 on an outright basis with stock up a little more than 3%.

They came in as stock sold off heading into the market close.

The notes were changing hands at 104 versus a stock price of $78.26 in the late afternoon.

The notes expanded at least 4 points dollar-neutral early in the session, a source said.

Another source saw them up 5 points dollar-neutral in the late afternoon.

There was more than $41 million in reported volume.

While the notes were putting in a strong performance in the aftermarket, they modeled fair value to rich at the midpoint of initial talk, a source said.

“It’s a frenzy,” a source said. “People are buying the story, not the model.”

Renewable energy stocks are expected to continue to pick up steam under the Biden administration.

Sunrun’s stock traded to a high of $81.73 and a low of $75.36 before closing the day at $75.71, a decrease of 3.69%.

Alarm.com active

Alarm.com’s 0% convertible notes due 2026 were active and making gains on an outright basis as stock sold off during Monday’s session.

The 0% convertible notes were up about 0.375 point outright with stock down more than 1%.

The 0% notes were changing hands at 101.625 versus a stock price of $96.97 in the late afternoon.

There was more than $20 million in reported volume.

Alarm.com’s stock traded to a high of $99.29 and a low of $95.74 before closing the day at $96.58, a decrease of 1.31%.

Mentioned in this article:

Alarm.com Nasdaq: ALRM

BridgeBio Pharma Inc. Nasdaq: BBIO

Marriott Vacations Worldwide Corp. NYSE: VAC

Sunrun Inc. Nasdaq: RUN

Two Harbors Investment Corp. NYSE: TWO

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