Morning Commentary: Bilibili, Cerence, Datadog eyed; new deals make aftermarket debut

By Abigail W. Adams

Portland, Me., May 28 – New deals remained the focus on Thursday with three new convertible offerings set to price after the market close and three deals making their aftermarket debut.

Bilibili Inc. plans to price $650 million of seven-year convertible notes, Cerence Inc. plans to price $150 million of five-year convertible notes and Datadog Inc. intends to sell $550 million of five-year convertible notes after the market close on Thursday.

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

As market players eyed the new deals in the pipeline, new paper from NuVasive Inc., Air Canada and Silicon Laboratories Inc. hit the secondary space.

While new paper from NuVasive was expanding dollar-neutral, it traded down on an outright basis.

Air Canada soared outright, and Silicon Labs was up on both an outright and dollar-neutral basis.

Bilibili eyed

Bilibili plans to price $650 million of seven-year convertible notes after the market close on Thursday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be marketed with assumptions of 725 basis points over Libor and a 40% vol.

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

Cerence on tap

Cerence plans to sell $150 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 2.75% to 3.25% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be marketed with assumptions of 750 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 4.4 points cheap at the midpoint of talk, a source said.

Datadog on deck

Datadog plans to price $550 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.125% to 0.625% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of 425 bps over Libor and a 40% vol.

Using those assumptions, the deal looked about 4.375 points cheap at the midpoint of talk, a source said.

The credit spread for the software company was among the tightest to come for the sector since the March meltdown with most software companies being marketed with credit spreads of 500 bps or higher, a source said.

While the credit spread may be a sign that new deals are starting to tighten, Datadog also has a lot of cash on the books, which justifies the spread.

However, using a more conservative credit spread of 500 bps over Libor and a 45% vol., the deal looked about 2.4 points cheap at the midpoint of talk, a source said.

NuVasive below par

NuVasive priced $400 million of three-year convertible notes after the market close on Wednesday at par with a coupon of 1% and an initial conversion premium of 32.5%.

Pricing came at the midpoint of talk for a coupon of 0.75% to 1.25% and at the cheap end of talk for an initial conversion premium of 32.5% to 37.5%, according to a market source.

The 1% notes were trading off on an outright basis with stock down more than 2%.

The notes traded as low as 98.875. However, the majority of prints were between 99.375 and 99.5.

While down outright, the notes expanded 0.625 point dollar-neutral.

NuVasive stock was changing hands at $61.95, a decrease of 2.5%, shortly before 11 a.m. ET.

Air Canada in demand

Air Canada priced an upsized $650 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 4% and an initial conversion premium of 30%.

Pricing came tighter than initial talk for a coupon of 4.5% to 5% and at the rich end of initial talk for a conversion premium of 25% to 30%, according to a market source.

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

Concurrently with the convertible notes offering, the company priced a follow-on offering of C$500.5 million, or 30.8 million of class A and/or class B shares at C$16.25 a share.

The convertible notes soared on an outright basis, trading as high as 104 early in the session, a source said.

Air Canada stock, which trades on the Toronto exchange, traded down to C$16.22, a decrease of 1.34%, shortly before 11 a.m. ET.

Silicon Labs gains

Silicon Laboratories sold $500 million of five-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 0.625% and an initial conversion premium of 35%.

Price talk was for a coupon of 0.375% to 0.875% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The notes were putting in a strong performance on an outright and dollar-neutral basis.

The 0.625% notes traded up to 103.25 early in the session.

They expanded 2 points dollar-neutral.

Silicon Labs stock traded up to $95.06, an increase of 4.59%, shortly before 11 a.m. ET.

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