Alteryx, Ironwood, Mesa Labs eyed; CorEnergy, BlackLine, Clovis on tap; Snap skyrockets

By Abigail W. Adams

Portland, Me., Aug. 7 – The convertibles primary market was in high gear with Snap Inc.’s $1.1 billion offering pricing post-close on Tuesday, four deals set to price after the market close on Wednesday and two deals on deck for Thursday.

New offerings from Mesa Laboratories Inc., Alteryx Inc., Ironwood Pharmaceuticals, Inc. and CorEnergy Infrastructure Trust, Inc. are set to price after the market close on Wednesday.

While some deals modeled better than others, all looked cheap based on underwriters’ assumptions, sources said.

The forward calendar continued to grow with BlackLine Inc. planning to price $435 million of five-year convertible notes and Clovis Oncology, Inc. planning to sell $225 million of five-year convertible notes after the market close on Thursday.

Snap’s newly priced convertible notes dominated activity in the secondary space and skyrocketed on their debut.

Outside of the new paper, some convertibles issuers saw large movements on Wednesday following earnings.

New Relic Inc.’s 0.5% convertible notes due 2023 “got crushed,” as stock sank more than 30% on Wednesday, a market source said.

For Thursday

The convertibles primary market continued to roll out new deals at a head-spinning pace with two more offerings set to price after the market close on Thursday.

Clovis Oncology plans to sell $225 million of five-year convertibles with price talk for a coupon of 4% to 4.5% and an initial conversion premium of 25% to 30%, according to a market source.

J.P. Morgan Securities LLC and BofA Securities Inc. are bookrunners for the Rule 144A offering, which carries a greenshoe of $33.75 million.

Proceeds will be used, in part, to repurchase a portion of Clovis’ 2.5% convertible notes due 2021 in privately negotiated transactions.

BlackLine plans to price $435 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

JPMorgan and Morgan Stanley & Co. LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $65 million.

Ironwood looks cheap

Ironwood plans to price a $165 million tranche of five-year convertible notes and a $165 million tranche of seven-year convertible notes after the market close on Wednesday.

Both tranches looked cheap, sources said.

Price talk for the five-year tranche is for a coupon of 0.625% to 1.125% and an initial conversion premium of 35% to 40%.

The tranche is being marketed with assumptions of 375 basis points over Libor and a 40% vol., which modeled about 2 points cheap at the midpoint of talk, according to a market source.

Price talk for the seven-year tranche is for a coupon of 1.25% to 1.75% and an initial conversion premium of 35% to 40%.

The longer duration tranche carries assumptions of 425 bps over Libor and a 40% vol., which modeled about 2.75 points cheap at the midpoint of talk.

A portion of the proceeds will be used to repurchase up to $185 million of the outstanding amount of Ironwood’s 2.25% convertible notes due 2022.

While some sources felt the credit spread should be wider, they were most likely based on the level of the 2.25% notes.

Ironwood completed a spinoff in early April which resulted in an adjustment to the conversion rate of the 2.25% notes.

While the spinoff was previously a cause for concern with many fearing the 2.25% notes would tank as a result, the notes held. They were last seen changing hands around 105.25.

The 2.25% notes currently have $335 million outstanding, according to Trace data.

Alteryx on tap

While Alteryx’s new offering had the tightest pricing of the deals in the pipeline, the company also had the best credit, sources said.

Alteryx plans to price a $350 million tranche of five-year convertible notes and a $350 million tranche of seven-year convertible notes after the market close on Wednesday.

Price talk for the five-year convertible notes is for a coupon of 0.25% to 0.75% and an initial conversion premium of 45% to 50%, according to a market source.

Price talk for the seven-year tranche is for a coupon of 0.75% to 1.25% and an initial conversion premium of 45% to 50%.

The five-year tranche was being marketed with a credit spread of 250 bps over Libor and a 40% vol.

The seven-year tranche was being marketed with a credit spread of 300 bps over Libor and a 40% vol.

Both tranches modeled about 1 point cheap at the midpoint of talk.

Proceeds from Alteryx’s deal will also be used to refinance its existing convertible notes.

The computer software company plans to repurchase up to 50% of the outstanding 0.5% convertible notes due 2023 through individually negotiated transactions.

Mesa Labs’ offering

While Mesa Labs’ offering was the cheapest deal in the pipeline, it also was the riskiest credit.

Mesa Labs plans to price $150 million of six-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.375% to 1.875% and an initial conversion premium of 30% to 35%.

The deal is being marketed with a credit spread of 400 bps over Libor and a 34% vol., which modeled about 2.5 points at the midpoint of talk, a source said.

Some sources felt the assumptions were tight. The deal looked to be fair value with a wider credit spread and lower vol., a market source said.

CorEnergy wall-crossed

CorEnergy plans to price a $100 million offering of six-year convertible notes with price talk for a coupon of 5.5% to 6% and an initial conversion premium of 12.5% to 17.5%.

Stifel, Nicolaus & Co. Inc. is bookrunner for the Rule 144A offering.

The deal appeared to be wall-crossed with few focused on the offering, sources said.

Proceeds will be used to repurchase a portion of the company’s outstanding 7% senior notes due 2020 through privately negotiated transactions.

Snap skyrockets

Snap priced an upsized $1.1 billion offering of seven-year convertible notes after the market close on Tuesday at par with a coupon of 0.75% and an initial conversion premium of 40%, according to a market source.

Price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 37.5% to 42.5%.

The greenshoe was also upsized to $165 million.

The initial size of the deal was $1 billion with a greenshoe of $150 million.

The new paper dominated activity in the secondary space and skyrocketed on debut.

The 0.75% convertible notes traded as high as 103 pre-open.

While they came in to 101.75 bid, 102 offered shortly before the opening bell, they again rallied back to 103 about one hour into the session, which is where they remained heading into the afternoon.

With stock off during Wednesday’s session, the notes expanded as much as 4 points dollar-neutral, sources said.

There was more than $308 million in reported volume heading into the market close.

Snap stock closed Wednesday at $15.91, a decrease of 2.33%.

Massive moves

In addition to a flood of new paper, the convertibles secondary space saw large price movements among its outstanding issuers.

New Relic’s 0.5% convertible notes due 2023 were active with the notes “getting crushed,” as stock dropped more than 30% in intraday trading.

The 0.5% notes traded down more than 12 points outright.

They were seen changing hands at 93.625 versus an equity price of $58.61 in the late afternoon.

The credit spread on the notes blew out over 100 bps, resulting in a drop in value of about 3 points, a market source said.

However, from a dollar-neutral perspective, the notes expanded a few points on the move down, another source said.

More than $15 million of the bonds were on the tape by the late afternoon.

While New Relic beat analyst expectations on both the top and bottom line in its first-quarter earnings report, stock tanked after the software analytics company reported weak guidance.

New Relic reported earnings per share of 19 cents versus analyst expectations for earnings per share of 8 cents.

The company reported revenue of $141 million versus analyst expectations for revenue of $140 million.

However, the company’s second-quarter guidance for revenue of $143 million to $145 million missed analyst expectations for revenue of $146 million.

Mentioned in this article:

Alteryx Inc. NYSE: AYX

BlackLine Inc. Nasdaq: BL

Clovis Oncology, Inc. Nasdaq: CLVS

CorEnergy Infrastructure Trust, Inc. NYSE: CORR

Ironwood Pharmaceuticals, Inc. Nasdaq: IRWD

Mesa Laboratories Inc. Nasdaq: MLAB

New Relic Inc. NYSE: NEWR

Snap Inc. NYSE: SNAP

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