Brookdale Senior Living convertibles eyed as equities sell off; Opendoor, Sea trade down

By Abigail W. Adams

Portland, Me., Sept. 28 – The convertibles primary market had one deal on deck as equities saw their worst single-day decline in months.

Brookdale Senior Living Inc. plans to price $200 million of five-year convertible notes after the market close on Tuesday.

Despite the bloodletting in equities, the deal was in demand during bookbuilding with books closing early.

The rising 10-year Treasury yield, deadlock over raising the U.S. debt ceiling, and a fresh challenge to the bipartisan infrastructure bill sparked widespread selling in equities with tech and growth stocks the hardest hit.

The Dow Jones industrial average closed the day down 569 points, or 1.63%, the S&P 500 index closed down 2.04%, the Nasdaq Composite closed down 2.83% and the Russell 2000 index closed down 2.24%.

The 10-year Treasury yield solidified above 1.5%, closing the day at 1.544% after reaching as high as 1.562%.

While there was decent volume in the secondary space, few names saw concentrated trading activity.

There was $120 million on the tape a little over one hour into Tuesday’s session and $539 million in reported volume about one hour before the market close.

There was a wide breadth to the names on the tape with the trading activity more the result of end of quarter cleanup than the broad sell-off in equities, a source said.

“When it’s the whole market like this, people tend to wait to make a move,” the source said.

Opendoor Technologies Inc.’s 0.25% convertible notes due 2026 and Sea Ltd.’s 0.25% convertible notes due 2026 were among the most active names in the secondary space with the notes trading down alongside stock.

Brookdale eyed

Brookdale Senior Living plans to price $200 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2% to 2.5% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 600 basis points over Libor and a 38% vol., according to a market source.

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

The deal was in demand during bookbuilding with books closing early, a source said.

Stock was also relatively unscathed by the sell-off in equities and was hovering around unchanged in intraday activity before late session selling pushed it back into negative territory.

The books closing early and the stock “price action battling back to unchanged tells the story that it’s a done deal,” a source said.

Trading down

Opendoor Technologies’ 0.25% convertible notes due 2026 and Sea’s 0.25% convertible notes due 2026 were among the few names to see more than $10 million in reported volume.

Both relatively recent deals were moving lower alongside stock.

Opendoor’s 0.25% convertible notes were down about 2 points outright with stock off a little over 4%.

The 0.25% notes were changing hands at 124.125 versus a stock price of $20.17 in the late afternoon.

There was about $10 million in reported volume.

Opendoor’s stock traded to a high of $20.78 and a low of $19.93 before closing the day at $20.05, a decrease of 4.52%.

Sea’s 0.25% convertible notes due 2026 were also down about 2 points outright with the company’s equity off 5%.

The notes were changing hands at 101.125 versus an equity price of $317.39 in the late afternoon.

There was about $10 million in reported volume.

Sea’s American Depositary Shares traded to a high of $332.38 and a low of $313.81 before closing the day at $316.72, a decrease of 5.81%.

Mentioned in this article:

Brookdale Senior Living Inc. NYSE: BKD

Opendoor Technologies Inc. Nasdaq: OPEN

Sea Ltd. NYSE: SE

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