Cheesecake Factory convertibles on deck; Clarivate mandies flat; WisdomTree expands

By Abigail W. Adams

Portland, Me., June 10 – The convertibles primary and secondary markets remained active on Thursday with one new offering on deck and two deals totaling $1.4 billion making their aftermarket debut.

The Cheesecake Factory Inc. plans to sell $300 million of five-year convertible notes after the market close on Thursday.

The new deal looked cheap and was in demand during bookbuilding although some sources questioned the vol. assumption used by underwriters.

Meanwhile, $1.4 billion of new paper entered the secondary space.

Clarivate plc priced $1.25 billion of three-year par-of-$100 series A mandatory convertible preferred stock and WisdomTree Investments Inc. priced $150 million of five-year convertible notes after the market close on Wednesday.

Clarivate’s mandatory convertible preferreds were flat on an outright basis but performing well for hedge players based on where stock was sold, sources said.

WisdomTree’s new notes were trading up on an outright and dollar-neutral basis.

Etsy Inc.’s recently priced 0.25% convertible notes due 2028 remained active their second day in the secondary space.

However, the notes were largely unchanged.

Cheesecake on deck

The Cheesecake Factory plans to sell $300 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The deal was heard to be in the market with assumptions of 375 basis points over Libor and a 40% vol.

Using those assumptions, the deal looked 3.45 points cheap at the midpoint of talk, a source said.

Another source saw the deal upwards of 5 points cheap at the midpoint of talk.

However, a 40% vol. seemed aggressive for the stock, a source said.

The deal was in demand with the books heard to be 2x oversubscribed.

Concurrently, the company plans to price a secondary offering of $175 million in common stock.

Proceeds will be used to repurchase 150,000 shares of its series A convertible preferred stock for $447 million in cash.

Holders of the remaining 50,000 outstanding shares of the convertible preferred stock will convert them into common stock and receive $10.4 million in cash.

Clarivate flat

Clarivate priced $1.25 billion of three-year par-of-$100 series A mandatory convertible preferred stock after the market close on Wednesday at par with a dividend of 5.25% and a threshold appreciation premium of 20%.

Pricing came at the cheap end of talk for a dividend of 4.75% to 5.25% and at the midpoint of talk for a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

Concurrently, the company priced a secondary offering of $1 billion, or 38,461,538 shares at a public offering price of $26.00.

Approximately $750 million, or 28,846,154 shares, were offered by the company and $250 million, or 9,615,384 shares, were offered by existing shareholders.

The mandatory convertible preferreds were flat on an outright basis.

They were changing hands at par versus a stock price of $26.00 throughout the session.

While the mandatories were also flat dollar-neutral based off of the price of the secondary offering, some hedge players active in the name sold stock at a much higher price.

“It’s doing well for swap guys,” a source said. “They’re winning.”

Clarivate’s stock traded to a high of $26.35 and a low of $25.73 before closing the day at $26.01, a decrease of 1.44%.

WisdomTree expands

WisdomTree priced $150 million of five-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 3.25% and an initial conversion premium of 60%.

Price talk was for a coupon of 3% to 3.5% and an initial conversion premium of 57.5% to 62.5%, according to a market source.

The small offering was wall-crossed. However, the books were strong with the deal 3x oversubscribed, a source said.

The deal came as a “happy meal” with $30.8 million of net proceeds used to repurchase common stock.

The notes were performing well on an outright and dollar-neutral basis in secondary market activity.

They were changing hands in the 100.75 to 101.25 context early in the session.

There were marked at 100.25 bid, 101.5 offered in the late afternoon.

The 3.25% notes expanded upwards of 0.75 point dollar-neutral, a source said.

WisdomTree’s stock traded to a high of $7.16 and a low of $6.89 before closing the day unchanged at $6.90.

Etsy day 2

Etsy’s 0.25% convertible notes due 2028 remained active their second day in the secondary space although the notes were largely unchanged.

The 0.25% notes were wrapped around 101 during Thursday’s session.

However, the notes were unchanged dollar-neutral, a source said.

Etsy’s stock traded to a high of $170.03 and a low of $166.07 before closing the day largely flat at $167.15, a decrease of 0.09%.

While unchanged on Thursday, the 0.25% notes expanded upwards of 2 points dollar-neutral on their aftermarket debut on Wednesday.

Mentioned in this article:

Cheesecake Factory Inc. Nasdaq: CAKE

Clarivate plc NYSE: CLVT

Etsy Inc. Nasdaq: ETSY

WisdomTree Investments Inc. Nasdaq: WETF

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