Overnight Liberty Media/Sirius exchangeables model cheap; Tilray adds with higher shares

By Rebecca Melvin

New York, Nov. 21 – The convertibles secondary market was busy on Thursday with one new deal launched ahead of the open, garnering attention among market players.

The overnight Liberty Media Corp. deal was initially for $400 million of 30-year senior notes exchangeable into shares of Sirius XM Holdings Inc. It was later upsized to $525 million, a market source said. It was being modeled with a few different assumptions but looked cheap regardless of the inputs cited.

Back in secondary market action, convertibles were mostly moving to the upside on an outright basis even though both stock indices and bonds in the broader markets edged lower following gains earlier in the week.

Tilray Inc.’s 5% convertibles due 2023 traded up a couple of points from where it languished at the 50 mark after the Canadian-based cannabis company reported earnings.

Tilray shares jumped $1.51, or 7.2%, to $22.43 but are still off more than 68% for the year since Jan. 2. The company sold twice as much cannabis than the year before but on lower prices as the Canadian market struggles with oversupply.

Good flow persists in some of the recent new issues, and that paper has mostly edged up. Sea Ltd.’s 1% convertibles, which priced on Nov. 13, were active and up about 0.44 point at 102.6, with the underlying shares down a nickel to $37.22.

Halozyme Therapeutics Inc.’s 1.25% notes due 2024, which priced at the same time as Sea, also saw activity on Thursday.

The Halozyme notes were up 0.3 point to 102.3, according to Trace data, while Halozyme shares slipped 0.63% to $18.97.

In all, $447.4 million of convertible bonds changed hands on Thursday, according to Trace data not long before the market close.

But this week’s new offerings, including Chefs’ Warehouse Inc.’s $130 million of 1.875% convertibles due 2024 and Fluidigm Corp. $50 million of 5.25% notes due 2024, were not heard in trade on Thursday.

Liberty deal looks cheap

Using a credit spread of 275 basis points over Libor and 28.75% vol., Liberty Media’s deal modeled to be worth 104.24, a New York-based trader said.

Using a credit spread of 275 bps over Libor and a lower vol. of 22% made the deal worth 103.3 at the midpoint of the talked price range of 2.5% to 2.75% coupon and 27.5% to 30% initial exchange premium, a New York-based market source said.

Some thought the credit should be a little wider, at 300 bps over, which made the deal worth about 102.5, the source said.

Liberty Media is an Englewood, Colo.-based media, communications and entertainment company. Sirius is a New York-based broadcasting company that provides satellite radio and online radio services.

J.P. Morgan Securities LLC and BNP Paribas Securities Corp. are active bookrunners of the Rule 144A transaction, which has a $60 million greenshoe.

The proceeds are earmarked for general corporate purposes, including potential mergers or acquisitions, interest payments on debentures offered and repayment of borrowings outstanding under its margin loan secured by shares of Sirius XM.

The notes are non-callable until Dec. 1, 2024, and there is a put at year five.

Mentioned in this article:

Chefs’ Warehouse Inc. Nasdaq: CHEF

Fluidigm Corp. Nasdaq: FLDM

Halozyme Therapeutics Inc. Nasdaq: HALO

Sea Ltd. NYSE: SE

Sirius XM Holdings Inc. Nasdaq: SIRI

Tilray Inc. Nasdaq: TLRY

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