Morning Commentary: Peloton convertible notes in focus, surge on debut; Spire on deck

By Abigail W. Adams

Portland, Me., Feb. 9 – Peloton Interactive Inc. was the name of the day on Tuesday after the New York-based exercise and media company priced an upsized $875 million offering of five-year convertible notes.

The demand seen during bookbuilding followed the notes into the secondary space where they exploded out of the gate.

While Peloton’s new paper was in focus in the secondary space, the primary market had one more deal in the works.

Spire Inc. plans to price $150 million three-year $50-par equity units after the market close on Tuesday.

Peloton in focus

Peloton priced an upsized $875 million offering of five-year convertible notes after the market close on Monday at par with a coupon of 0% and an initial conversion premium of 65%.

Pricing came in line with tightened talk for a fixed coupon of 0% and at the rich end of talk for an initial conversion premium of 60% to 65%.

Initial price talk was for a fixed coupon of 0% and an initial conversion premium of 55% to 60%.

The initial size of the offering was $650 million.

The deal played to massive demand during bookbuilding with the demand following it into the secondary space.

The 0% notes exploded out of the gate.

They traded as high as 106 and were up 5.5 points on a dollar-neutral, or hedged, basis, according to a market source.

“The price is spinning out of control,” a source said.

The notes dominated activity in the secondary space with more than $400 million in estimated volume.

Peloton’s stock traded up to $148.24, an increase of 2.16%, shortly before 11 a.m. ET.

Spire on deck

Spire plans to price $150 million three-year $50-par equity units after the market close on Tuesday with price talk for a dividend of 7.5% to 8% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The deal was heard to be marketed with assumptions of 150 bps over Libor and a 29.5% to 26.5% vol. skew, a source said.

Using those assumptions, the deal looked 1.5 points cheap at the midpoint of talk, a source said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.