Booking Holdings tightens talk; Health Catalyst looks cheap; Chimera notes at parity

By Abigail W. Adams

Portland, Me., April 8 – The convertibles primary market continued to roll out overnight deals on Wednesday with two expected to price after the market close.

Health Catalyst Inc. plans to price $175 million of five-year convertible notes, and Booking Holdings Inc. plans to sell $750 million of five-year convertible notes.

Both offerings looked cheap, sources said.

Booking Holdings’ offering was heard to be playing to solid demand with talk tightening during the subscription process.

The new offering jumpstarted activity in Booking’s outstanding convertible notes, which saw massive volume as holders switched out of the old to buy into the new.

The influx of new paper kept the secondary space hopping on Wednesday with $640 million in reported volume about one hour before the market close.

New paper remained in focus with Chimera Investment Corp.’s 7% convertible notes due 2023 active and trading at parity on their secondary market debut.

Slack Technologies Inc.’s 0.5% convertible notes due 2025 also continued to post gains their second day in the secondary space.

Health Catalyst seen cheap

Health Catalyst plans to price $175 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 2.5% to 3% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

The deal was heard to be marketed with assumptions of 800 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 5.36 points to 5.5 points cheap at the midpoint of talk, sources said.

However, the borrow on the stock is tough with the borrow rate negative 0.6%, sources said.

While the deal looked cheap, the lack of a borrow made the offering less attractive, a source said.

Health Catalyst stock took a beating on the heels of the convertible announcement.

Stock closed Wednesday at $24.00, a decrease of 10.41%.

Booking tightens talk

Booking Holdings’ offering of $750 million five-year convertible notes was heard to be playing to massive demand with talk tightening during the subscription process.

Revised talk was for a coupon of 0.75% and an initial conversion premium of 35% to 37.5%.

Initial talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%.

Using assumptions of 375 bps over Libor and a 35% vol., the deal modeled about 4.43 points cheap at the midpoint of initial price talk, a market source said.

However, another source pegged assumptions as a credit spread of 400 bps over Libor and a 40% vol.

Using those assumptions, the deal modeled almost 6.5 points cheap at the midpoint of initial talk.

While the offering was less attractive with the revised talk, it still modeled about 3.2 points cheap with assumptions of 400 bps over Libor and a 40% vol., a source said.

Booking also priced a three-tranche offering of senior notes in the investment-grade primary market on Wednesday.

The five-year tranche was talked with a spread of 425 bps over Treasuries, a source said in explanation of the wider credit assumption.

Investment-grade credit spreads have widened considerably since mid-March, the source said.

While the primary market prepped Booking’s new offering, the travel fare aggregators’ outstanding convertible notes saw high volume activity.

Booking’s 0.9% convertible notes due 2021 were changing hands at 99.25 early in the session.

They traded at 98.75 versus a stock price of $1,391.91 in the late afternoon.

The bonds dominated activity in the secondary space with more than $111 million in reported volume.

Holders of the 0.9% convertible notes were switching out of the old to buy into the new. Buyers of the notes were covering their shorts in the name, a source said.

Booking’s soon-to-mature 0.35% convertible notes due 2020 also saw high-volume activity with the notes changing hands at 110 in the late afternoon.

Booking’s stock traded to a high of $1,428.72 and a low of $1,360.01 before closing the day at $1,372.06.

Proceeds from Booking’s new convertible notes offering will be used for the repayment of debt, including the outstanding convertible notes upon their conversion or maturity.

Chimera at parity

Chimera’s newly priced 7% convertible notes due 2023 were active on Wednesday and traded up to parity out of the gate, sources said.

Chimera priced an upsized $325 million offering of three-year convertible notes after the market close on Tuesday at par with a coupon of 7% and an initial conversion premium of 0%.

Pricing came at the cheap end of talk for a coupon of 6% to 7% and an initial conversion premium of 0%, according to a market source.

The greenshoe was also upsized to $48.75 million.

The initial size of the deal was $250 million with a greenshoe of $37.5 million.

The 7% notes skyrocketed in the secondary space.

They traded up to 108.75 in the late afternoon with more than $27 million in reported volume.

With an initial conversion premium of 0%, Chimera’s offering was essentially an equity surrogate, a market source said.

With the book value of the REIT hard to determine in the current market environment, the convertible note offering was an easier way to raise capital than pricing a secondary offering, a source said.

The notes traded up to parity on their market debut and will likely continue to trade with stock.

Chimera stock closed Wednesday at $7.11, an increase of 9.38%.

Slack Technologies gains

Slack Technologies’ 0.5% convertible notes due 2025 continued to gain on an outright and dollar-neutral basis their second day in the secondary space.

The 0.5% convertible notes traded up almost 4 points outright as stock rebounded.

The notes were changing hands at 105.25 in the late afternoon with about $24 million in reported volume, according to a market source.

The notes gained another 1 point dollar-neutral, a market source said.

Slack stock traded to a low of $23.37 and a high of $25.08 before closing the day at $24.90, an increase of 6.05%.

The notes performed well on their secondary market debut on Tuesday and expanded as much as 3 points dollar-neutral.

Mentioned in this article:

Booking Holdings Inc. Nasdaq: BKNG

Chimera Investment Corp. NYSE: CIM

Health Catalyst Inc. Nasdaq: HCAT

Slack Technologies Inc. NYSE: WORK

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