Becton Dickinson on tap; Sea, RealPage, Model N, Tricida eyed; Gossamer contracts

By Abigail W. Adams

Portland, Me., May 19 – The convertibles primary market continued to roll out new deals at an active clip with a $1.5 billion offering on deck for Wednesday, four deals totaling $1.625 billion set to price after the market close and two deals totaling $650 million making their aftermarket debut.

Becton, Dickinson and Co. plans to price $1.5 billion in $50-par depositary shares representing a 1/20th interest in its $1,000-par three-year series B mandatory convertible preferred stock after the market close on Wednesday with price talk for a dividend of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

J.P. Morgan Securities LLC, Barclays and Goldman Sachs & Co. LLC are active bookrunners for the registered offering, which carries a greenshoe of $225 million.

Sea Ltd. plans to price $1 billion of long five-year convertible notes, RealPage, Inc. plans to price $300 million of five-year convertible notes, Model N Inc. plans to sell $150 million of five-year convertible notes, and Tricida Inc. plans to sell $175 million of seven-year convertible notes after the market close on Tuesday.

The deals continued to model cheap based on underwriters’ assumptions, sources said.

“These are all priced for a buyer’s market,” a source said.

However, the deals were not rescue financing with the companies’ business models intact, a source said.

Meanwhile, new paper from Envista Holdings Corp. and Gossamer Bio Inc. made their aftermarket debut.

While Envista’s convertible notes traded up on an outright basis, they were contracted dollar-neutral.

Gossamer’s new notes were down on both an outright and dollar-neutral basis.

Sea’s exchange

Sea plans to sell $1 billion of long five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.125% to 2.625% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 750 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of talk, sources said.

Sea is a well-known and well-liked company in the convertible universe.

“It’s a good hedge name,” a market source said. “The market cap is enormous.”

The Singapore-based consumer internet company is a serial issuer of convertible notes and has made investors a lot of money in the past, a source said.

In connection with the offering, the company plans to exchange a portion of its 2.25% convertible notes due 2023 for cash, American Depositary Shares, or a combination of both in privately negotiated transactions.

Sea priced a $650 million issue of the 2.25% convertible notes due 2023 in June 2018.

The 2.25% notes were active on Tuesday and were changing hands at 352 early in the session.

However, it was unclear if the activity was related to the exchange, a source said.

The new offering also jumpstarted activity in Sea’s 1% convertible notes due 2024.

The notes were changing hands at 149 late Tuesday afternoon, according to a market source.

Sea’s ADSs traded to a high of $72.80 and a low of $68.10 before closing the day at $68.27, a decrease of 1.76%.

RealPage eyed

RealPage plans to price $300 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 500 bps over Libor and a 35% vol., according to a market source.

Using those assumptions, the deal looked 3.75 points cheap at the midpoint of talk, sources said.

The property management software company is a player in the new economy, a market source said.

Concurrently with the convertible notes, the company will price a secondary offering of up to $300 million of common stock.

RealPage is also a repeat issuer of convertible notes.

The new offering jumpstarted activity in the company’s 1.5% convertible notes due 2022.

The notes were changing hands around 158 on an outright basis.

RealPage stock traded as high as $65.87 and as low as $59.59 before closing the day at $61.65, a decrease of 5.3%.

Model N on deck

Model N plans to sell $150 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.125% to 2.625% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 800 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 2.875 points cheap at the midpoint of talk, a source said.

While a smaller offering, the company was well-liked by investors, especially outright accounts, a source said.

While the company was interesting, the offering was not the same type of revenue growth trade of other software companies, sources said.

Tricida looks cheap

Tricida plans to price $175 million of seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 25% to 30%, according to a market source.

Underwriters were marketing the deal with assumptions of 1,000 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked almost 3 points cheap at the midpoint of talk, a source said.

The company was more of a health care company that was working on a good idea than a pharmaceutical company, a source said.

The company is working on the development of a drug candidate to treat metabolic acidosis in patients with chronic kidney disease.

Envista active

Envista Holdings priced an upsized $450 million of five-year convertible notes after the market close on Monday at par with a coupon of 2.375% and an initial conversion premium of 32.5%.

Pricing came at the cheap end of initial price talk for a coupon of 1.875% to 2.375% and at the midpoint of talk for an initial conversion premium of 30% to 35%, according to a market source.

The greenshoe was also upsized to $67.5 million.

The initial size of the deal was $400 million with a greenshoe of $60 million.

The new paper was sloppy out of the gate but improved alongside stock as the session progressed, a source said.

The 2.375% notes were changing hands on a par handle in the early afternoon.

However, they were quoted at 103.25 bid, 104 offered with stock up more than 9% in the late afternoon, a source said.

The notes closed the day at 102.95 bid, 103.35 offered versus a stock price of $17.10.

While the notes did well on an outright basis, they closed the day contracted about 1 point, a source said.

The notes dominated activity in the secondary space with more than $86 million in reported volume by the late afternoon.

Envista stock traded to a low of $15.69 and a high of $17.61 before closing the day at $17.46, an increase of 10.09%.

Gossamer upsizes

Gossamer Bio priced an upsized $200 million of seven-year convertible notes after the market close on Monday at par with a coupon of 5% and an initial conversion premium of 22.5%.

Pricing came in line with talk for a fixed coupon of 5% and a fixed initial conversion premium of 22.5%, according to a market source.

The greenshoe was upsized to $30 million.

The initial size of the offering was $175 million with a greenshoe of $26.25 million.

The biopharmaceutical company also priced a secondary offering of $125 million, or 9,433,963 shares, at $13.25 a share.

The new paper traded down as stock collapsed on Tuesday.

They traded as low as 98 and were changing hands around 99.25 in the late afternoon.

They were contracted dollar-neutral, a source said.

The bonds saw more than $20 million in reported volume.

Gossamer stock closed Tuesday at $12.64, a decrease of 15.85%.

Mentioned in this article:

Becton, Dickinson and Co. NYSE: BDX

Envista Holdings Corp. NYSE: NVST

Gossamer Bio Inc. Nasdaq: GOSS

Model N Inc. NYSE: MODN

RealPage, Inc. Nasdaq: RP

Sea Ltd. NYSE: SE

Tricida Inc. Nasdaq: TCDA

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