Morning Commentary: Pinduoduo active; new Lannett adds on debut; Broadcom upsizes

By Rebecca Melvin

New York, Sept. 25 – Pinduoduo Inc.’s 0% five-year convertible senior notes dominated trading in the U.S. convertible bonds market on Wednesday with that paper around 102.75 in early action. The China-based e-commerce company sold $875 million of the notes that debuted in secondary action on Tuesday, and there were $165.6 million of trades in those bonds so far on Wednesday, according to Trace data.

Also new to the market in terms of notes on Wednesday was Lannett Co. Inc.’s new $75 million deal of 4.5% seven-year convertible senior notes. Those bonds were higher in trade at about 102 last, with the common shares of the Philadelphia-based generic drug company taking a hit and down 15.5% last after the company priced the Rule 144A, overnight convertibles deal with a 10% initial conversion premium.

The Lannett shares were last at $11.78, which was down $2.16, or 15.5%.

The notes are non-callable for four years and then provisionally callable at a price trigger of 130%. They will be settled in shares at maturity.

Broadcom Inc. swamped the mandatories market with a new $3.25 billion issue of 8% mandatory preferred shares. The San Jose, Calif.-based chip maker had initially talked a $3 billion deal. The new preferreds priced with a 16.9% initial conversion premium.

The Broadcom common shares are down 5% since the mandatory deal was announced after the market close on Tuesday. It was not immediately known how the mandatories were trading.

Most of Broadcom’s sales are made in China, so the company has been hurt by the U.S.-China trade war, and it has lagged its peers significantly this year in terms of returns.

In the international convertible markets, France’s Kering SA plans to price €500 million of 0% bonds due 2022 exchangeable for ordinary shares of Puma SE. Pricing was expected to occur later on Wednesday, according to a market source.

The Regulation S only bonds were being talked at an issue price of 107.25 to 108.75 and an initial exchange premium of 30% to 35%.

Joint bookrunners are Credit Agricole CIB (global coordinator), Societe Generale and HSBC.

The bonds are non-callable for two years and then provisionally callable at par at a price trigger of 125%.

There are no puts, except in the event of a change of control of Kering combined with a rating downgrade or in the event of a change of control of Puma or in the event of a delisting of Puma shares.

Proceeds will be used for general corporate purposes.

Puma is a German multinational company, of which Kering owns 16%.

Paris-based Kering is a luxury brands group.

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