Splunk notes on deck; Livongo, HubSpot convertible offerings eyed; Bilibili tops par

By Abigail W. Adams

Portland, Me., June 1 – Following the highest volume month since 2009, the convertibles primary market launched June with three new offerings on deck.

Splunk Inc. plans to price $900 million of seven-year convertible notes after the market close on Tuesday.

HubSpot Inc. plans to sell $400 million of five-year convertible notes and Livongo Health Inc. plans to price $400 million of five-year convertible notes after the market close on Monday.

The deals looked cheap based on underwriters’ assumptions and were heard to have done well during bookbuilding, sources said.

Meanwhile, Invacare Corp. exchanged a portion of its 5% convertible notes due 2021 and 4.5% convertible notes due 2022 for $71.4 million of new 5% series II convertible notes due 2024.

However, the notes were not active in the secondary space.

The usual suspects continued to dominate the tape with Pioneer Natural Resources Co.’s 0.25% convertible notes due 2025 and Southwest Airlines Co.’s 1.25% convertible notes due 2025 continuing to improve in high-volume activity.

After struggling on their aftermarket debut on Friday, Bilibili Inc.’s 1.25% convertible notes due 2027 topped par on Monday and were slightly improved dollar-neutral.

Splunk on deck

Splunk plans to price $900 million of seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.875% to 1.375% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Morgan Stanley & Co. LLC is lead left bookrunner for the Rule 144A offering, which carries a greenshoe of $135 million.

Proceeds will be used, in part, to repurchase for cash $500 million of the principal amount of the company’s 0.5% convertible notes due 2023.

HubSpot on tap

HubSpot plans to price $400 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0.125% to 0.625% and an initial conversion premium of 30% to 35%.

The deal was heard to be marketed with assumptions of 475 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 1.625 points cheap at the midpoint of talk, a source said.

While not as cheap as some of the other software names that have priced recently, HubSpot is a well-known name in the convertible universe.

The company plans to repurchase or exchange a portion of its 0.25% convertible notes due 2022 in individually negotiated transactions.

Proceeds from the new offering will be used to fund the cash portion of the repurchase or exchange.

The Cambridge, Mass-based software company priced a $400 million issue of the 0.25% notes in May 2018.

The notes broke double par last week and changed hands at 212.8 early Monday, according to Trace data.

Livongo Health eyed

Livongo Health plans to sell $400 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 25% to 30%.

The deal was heard to be marketed with assumptions of 600 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 2.625 points cheap at the midpoint of talk, a source said.

The data-based health coaching program is a first-time issuer of convertible notes.

However, the company is a welcome addition to the convertibles universe, a source said.

The deal was heard to be doing well during bookbuilding with books closing in the early afternoon.

The usual suspects

Some of the usual suspects continued to dominate trading activity on Monday.

Pioneer Natural Resources’ 0.25% convertible notes due 2025 continued to improve in heavy volume, a market source said.

The 0.25% notes were up about 1 point outright to trade up to a 110-handle. They were changing hands at 110.5 in the late afternoon.

The notes were improved another 0.25 point dollar-neutral, a source said.

There was more than $53 million in reported volume heading into the market close.

Pioneer Natural Resources stock traded as high as $93.67 and as low as $90.50 before closing the day at $92.91, an increase of 1.43%.

Pioneer Natural Resources was upgraded to “sector outperform” from “sector perform” by Scotiabank.

Southwest Airlines also continued to rip in the secondary space, a source said.

The notes traded as high as 117.25 on Monday but came in alongside stock to close the day at 115.875, sources said.

The notes saw more than $51 million in reported volume heading into the market close.

Southwest stock traded as high as $34.40 and as low as $32.16 before closing the day at $33.62, an increase of 4.74%.

The notes have staged a dramatic rebound over the past two weeks. They traded as low as a 92-handle as recently as May 15.

Southwest stock was again up on Monday as the company announced it would resume flights to the Caribbean and Mexico on July 1 and that it was expanding services in November due to an anticipated spike in demand.

In addition, the company announced it had received a second installment of aid of about $651.8 million through the U.S. Department of Treasury’s Payroll Support Program.

Bilibili tops par

Bilibili’s newly priced 1.25% convertible notes due 2027 were making gains on an outright basis their second day in the secondary space.

The 1.25% notes traded as high as 101 early Monday but came in to change hands at 100.5 in the late afternoon.

The notes improved about 0.25 point dollar-neutral. However, they remained contracted from their pricing date.

Bilibili’s American Depositary Shares traded to a high of $33.32 and a low of $32.32 before closing the day at $33.06, an increase of 1.94%.

The 1.25% notes traded as low as 97.5 on their market debut on Friday but rallied to close last Friday at 99.

The notes were down at least 2.5 points dollar-neutral on debut.

Mentioned in this article:

Bilibili Inc. Nasdaq: BILI

HubSpot Inc. NYSE: HUBS

Invacare Corp. NYSE: IVC

Livongo Health Inc. Nasdaq: LVGO

Pioneer Natural Resources Co. NYSE: PXD

Southwest Airlines Co. NYSE: LUV

Splunk Inc. Nasdaq: SPLK

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