Bilibili, Cerence convertibles eyed; Datadog upsizes; Air Canada, Silicon Labs expand

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 an upsized offering 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 and contributed to another day of heavy trading volume with more than $1 billion on the tape by the late afternoon.

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

Air Canada and Silicon Labs were 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.

The Shanghai-based online entertainment company is a well-known and well-liked name in the convertibles universe, and the deal is expected to do well, sources said.

However, some sources were apprehensive of the offering given renewed tensions between the United States and China.

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.

While the deal looked cheap, the borrow on the company’s stock is tight, another source said.

However, the deal was heard to be wall-crossed.

Datadog on deck

Datadog plans to price an upsized offering of $650 million five-year convertible notes at par with a coupon of 0.125% and an initial conversion premium of 37.5% after the market close, according to a market source.

The initial size of the deal was $550 million, and initial price talk was 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.

The deal was in demand during bookbuilding with the offering oversubscribed, sources 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 during Thursday’s session.

While down outright, the notes expanded about 0.625 point dollar-neutral, a source said.

There was more than $45 million in reported volume by the late afternoon.

NuVasive stock traded to a high of $62.86 and a low of $60.50 before closing the day at $61.40, a decrease of 3.37%.

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 an initial 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.

They were marked at 104.5 bid, 105 offered in the mid-afternoon, according to a market source.

The notes were active with more than $113 million in reported volume by the late afternoon.

While hedging of the notes is only possible for accounts that also operate in Canada, the notes appeared to be expanded about 3 points dollar-neutral, sources said.

Air Canada stock, which trades on the Toronto exchange, traded to a high of C$16.77 and a low of C$15.95 before closing the day at C$16.00, a decrease of 2.68%.

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 continued to trade around 103 heading into the late afternoon.

The notes expanded about 2 points dollar-neutral, a source said.

Silicon Labs traded to a high of $95.47 and a low of $90.45 before closing the day at $90.91, an increase of 0.02%.

Mentioned in this article:

Air Canada TSX: AC

Bilibili Inc. Nasdaq: BILI

Cerence Inc. Nasdaq: CRNC

Datadog Inc. Nasdaq: DDOG

NuVasive Inc. Nasdaq: NUVA

Silicon Laboratories Inc. Nasdaq: SLAB

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