21Vianet tightens talk; Bentley Systems looks cheap; Golar, Arch Resources active

By Abigail W. Adams

Portland, Me., Jan. 21 – After a quiet start to the week, the convertibles primary market returned to action with two deals set to price after the market close.

Bentley Systems Inc. plans to price $500 million of five-year convertible notes and 21Vianet Group Inc. plans to sell $525 million of five-year convertible notes after the market close on Thursday.

Both deals looked cheap based on underwriters’ assumptions and were heard to be in demand during bookbuilding.

Meanwhile, the secondary space remained firm on Thursday although equities were mixed with the S&P 500 index and Nasdaq squeaking out fresh gains and the Dow Jones industrial average and the Russell 2000 index coming in slightly after all set fresh records on Wednesday.

With no new paper entering the space all week, focus shifted to some outstanding issues with several off-the-run names active during Thursday’s session.

Golar LNG Ltd.’s soon-to-mature 2.75% senior notes due 2022 were again active on Thursday.

The notes returned to focus the previous week after the company announced a divestiture of some of its assets.

Arch Resources Inc.’s 5.25% convertible notes due 2025, a small illiquid issue, also saw some activity early in the session.

Bentley looks cheap

Bentley Systems plans to price $500 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.125% to 0.625% and an initial conversion premium of 40% to 45%, according to a market source.

The deal was being marketed with assumptions of 275 basis points over Libor and a 38% vol., a source said.

Using those assumptions, the deal looked 2.22 points cheap at the midpoint of talk.

The infrastructure engineering software company’s stock “seems overpriced,” a source said, “until you compare it to Autodesk Inc.”

Bentley Systems’ stock closed Thursday at $44.23, a decrease of 7.12%.

Competitor Autodesk’s stock closed Thursday at $306.46.

21Vianet tightens talk

21Vianet Group’s offering of $525 million five-year convertible notes was in demand during bookbuilding with talk tightening.

The Beijing-based internet data center services provider tightened talk to a fixed coupon of 0% and an initial conversion premium of 37.5% to 40%, according to a market source.

Initial price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%.

“Expect it to price at 0%, up 40%,” a source said.

Underwriters were marketing the deal with assumptions of 600 bps over Libor and a 45% vol., a source said.

Using those assumptions, the deal looked 3.16 points cheap at the midpoint of initial talk.

While the borrow on the stock was decent, there were risks involved in the offering.

The threat of China-based companies being delisted from U.S. exchanges is alive and well, even under the current administration, sources said.

“I wouldn’t want to be on hedge on this. If it gets delisted it will be a nightmare to trade,” a source said.

While former president Donald Trump is no longer in office, the blacklist of China-based companies that investors are prohibited from doing business for their alleged involvement with the Chinese military remains intact.

After a flip-flop, the New York Stock Exchange followed through with its decision to delist three China-based telecom companies in early January.

Off-the-run

With no new paper entering the space all week, outstanding issues returned to focus with several off-the-run issues seeing some action.

Golar’s 2.75% convertible notes due 2022 again saw decent trading volume.

While the majority of trades were on a 98-handle, there were some large million-dollar-plus trades at 96.75, according to Trace data.

The natural gas shipping company’s 2.75% notes were active the previous week and saw a large price movement after the company announced the divestiture of some of its assets.

The notes moved from the low 90s to a 98-handle after Golar announced that New Fortress Energy was acquiring the company’s interest in Hygo Energy and Golar LNG Partners.

The 2.75% notes trade for the yield with the notes “current” now that their maturity on Feb. 15, 2022 is about one year away, a source said.

Arch Resources’ 5.25% convertible notes due 2025, a small illiquid issue, also saw some action on Thursday.

The 5.25% notes were changing hands at 153.625 early in the session, a source said.

Arch Resources’ stock traded to a high of $51.29 and a low of $48.51 before closing the day at $50.49, a decrease of 1.37%.

Mentioned in this article:

21Vianet Group Inc. Nasdaq: VNET

Arch Resources Inc. NYSE: ARCH

Bentley Systems Inc. Nasdaq: BSY

Golar LNG Ltd. Nasdaq: GLNG

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