PAR Technology on tap; Integra convertibles eyed; Tesla’s rise continues; Lumentum up

By Abigail W. Adams

Portland, Me., Feb. 4 – With markets stabilizing from last week’s coronavirus induced volatility, a pick-up in primary market activity is expected with two deals on deck.

PAR Technology Corp. plans to price $90 million of six-year convertible notes after the market close on Wednesday with price talk for a coupon of 2.625% to 3.125% and an initial conversion premium of 30% to 35%, according to a market source.

Jefferies & Co. is bookrunner for the Rule 144A offering, which carries a greenshoe of $13.5 million.

Proceeds will be used to repurchase a portion of the company’s 4.5% convertible notes due 2024 in privately negotiated transactions.

Market players were eyeing Integra LifeSciences Holdings Corp.’s $500 million offering of long five-year convertible notes, which was set to price after the market close.

The deal from the well-known issuer of convertible notes looked slightly cheap and will most likely do well, sources said.

Meanwhile, Tesla Inc.’s convertible notes continued to dominate activity in the secondary space as stock shot up more than 20% in intraday trading on Tuesday.

While the secondary space was focused on Tesla, Luckin Coffee Inc.’s 0.75% convertible notes due 2025 also saw another day of active trading with the notes rallying on an outright basis.

While volume was comparatively light, Lumentum Holdings Inc.’s 0.5% convertible notes due 2026 jumped on both an outright and dollar-neutral basis following an earnings beat.

Integra eyed

Integra plans to price $500 million of long five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.375% to 0.875% and an initial conversion premium of 27.5% to 32.5%.

The deal is being marketed with assumptions of 250 basis points over Libor and a 28% vol., according to a market source.

Using those assumptions, the deal modeled a little over 0.25 point cheap at the midpoint of talk, a source said.

The medical device technology company has a senior revolving credit facility that priced at 150 bps over Libor, cash on the balance sheet and positive earnings.

Given that, the credit spread “doesn’t seem unreasonable,” the source said.

The company may also be pursuing a credit rating for the convertible notes, which will drive demand from European accounts.

Integra is also a well-known name in the convertibles universe with seven previous issues dating back to 2003, which have each since been retired.

Hedge accounts will be putting the deal up on swap, and with the notes a candidate for inclusion in the index, the deal is expected to be met with healthy demand and do well, sources said.

Tesla, Tesla, Tesla

Tesla’s convertible notes continued to dominate activity in the secondary space as stock shot up more than 20%.

The electric car manufacturer’s three tranches of convertible notes were the top three volume movers in the secondary space on Tuesday.

“If you’re not doing Tesla, you’re not doing much,” a source said.

After topping double par in the past week, all three tranches were heading toward triple par.

The 2% convertible notes due 2024 traded up to 311 with stock up 20% in the late afternoon.

The 2.735% convertible notes due 2022 traded up to 288.

The 1.25% convertible notes due 2021 traded up to 265.

Tesla stock traded as high as $968.99 before closing the day at $887.06, an increase of 13.73%.

The new level for the stock was partly due to a short-squeeze, sources said. However, analysts have also recently been raising their price target on the stock.

Investor Ron Baron also stated on “Squawk Box” on Tuesday that Tesla has the ability to generate $1 trillion in revenue in 10 years.

Luckin Coffee rallies

After last week’s sell-off and a volatile session on Monday, Luckin Coffee’s 0.75% convertible notes due 2025 were rallying on an outright basis on Tuesday.

The notes were up about 3 points outright with equity up more than 17%.

The 0.75% notes were changing hands just shy of 90 in the late afternoon.

While up outright, the notes were largely unchanged dollar-neutral on a 65% delta, a market source said.

The Beijing-based coffee shop chain’s ADS traded as low as $33.00 and as high as $36.24 before closing the day at $36.24, an increase of 15.60%.

Luckin’s equity was rallying after short-seller Andrew Left of Citron Research stated the coffee shop chain’s shares could double after concern over the coronavirus and Muddy Waters Capital’s short position on the stock blow over.

Luckin’s equity and convertible notes nosedived on Friday after Muddy Waters announced it was taking a short position on the stock due to allegations of financial impropriety made in an anonymous report.

Citron Research has refuted the allegations made in the report and gone public with its long position in the company.

Lumentum’s earnings

Lumentum’s 0.5% convertible notes due 2026 were making gains on both an outright and dollar-neutral basis on Tuesday following an earnings beat and upbeat guidance.

The 0.5% notes rose more than 6 points outright.

They were changing hands just shy of 113 in the late afternoon.

The notes were expanded about 0.5 point dollar-neutral, a market source said.

Lumentum stock traded to a low of $80.31 and a high of $86.52 before closing the day at $86.52, an increase of 12.04%.

The San Jose, Calif.-based telecommunications equipment company beat on both the top and bottom lines in its second-quarter earnings report.

Lumentum reported earnings per share of $1.53 versus analyst expectations for earnings of $1.29.

Revenue was $457.8 million versus analyst expectations for revenue of $452.2 million.

Guidance also beat expectations with third-quarter earnings per share expected to be $1.00 to $1.17 versus analyst expectations for estimates of earnings per share of $1.03.

Mentioned in this article:

Integra LifeSciences Holdings Corp. Nasdaq: IART

Luckin Coffee Inc. Nasdaq: LK

Lumentum Holdings Inc. Nasdaq: LITE

Tesla Inc. Nasdaq: TSLA

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