Primary markets $4.1 billion convertibles in eight deals; Twitter, Shake Shack eyed

By Abigail W. Adams

Portland, Me., March 1 – The convertibles primary market resumed a record-setting pace on Monday with three deals totaling $1.625 billion set to price after the market close on Monday and $2.475 billion in five deals on deck for Tuesday.

Twitter Inc. returned to the convertibles market with a $1.25 billion offering of five-year notes, which is slated to price after the market close.

MannKind Corp. also plans to price $150 million of five-year convertible notes, and Shake Shack Inc. plans to sell $225 million of seven-year convertible notes.

While all deals modeled cheap based on underwriters’ assumptions, sources were mixed on the offerings.

Meanwhile, five deals totaling $2.475 billion are set to price after the market close on Tuesday, including deals from PennyMac Corp., Beyond Meat Inc., Haemonetics Corp., Ceridian HCM Holding Inc. and Cable One Inc.

While sources expected an action-packed week with several deals in the pipeline, several were surprised to see the onslaught that launched on Monday.

However, equity markets saw a strong bounce back on Monday after last week’s sell-off with the Dow Jones industrial average closing the day up 603 points, or 1.95%, the S&P 500 up 2.38%, the Nasdaq composite up 3.01% and the Russell 2000 up 3.37%.

While equities roared into March, the convertibles secondary market was soft with the market down 0.375 point dollar-neutral.

“Deals are coming this week so accounts are selling,” a source said.

Twitter’s 0.25% convertible notes due 2024 were active and trading off as accounts made room for the newest offering.

Boingo Wireless Inc.’s 1% convertible notes due 2023 made large gains following news the company would be taken private in an acquisition by Digital Colony.

The forward calendar

The forward calendar ballooned on Monday with five deals totaling $2.475 billion launching after the market close.

While market players were aware it would be an active week, sources were surprised to see the onslaught of deals that launched in a single day.

PennyMac plans to price $200 million of five-year notes exchangeable for PennyMac Mortgage Investment Trust stock after the market close on Tuesday with price talk for a coupon of 5.25% to 5.75% and an initial exchange premium of 12.5% to 17.5%, according to a market source.

Beyond Meat plans to price $750 million of six-year convertible notes after the market close on Tuesday with price talk for a fixed coupon of 0% and an initial conversion premium of 47.5% to 52.5%, according to a market source.

Haemonetics plans to sell $425 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 40% to 45%, according to a market source.

Ceridian is bringing $500 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 47.5% to 52.5%, according to a market source.

Cable One plans to price an aggregate of $600 million of convertible notes in five- and seven-year tranches after the market close on Tuesday.

The deal consists of a $400 million tranche of five-year notes with price talk for a fixed coupon of 0% and an initial conversion premium of 25% to 30%, according to a market source.

The deal also includes a $200 million tranche of seven-year notes with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 25% to 30%.

Twitter returns

Twitter intends to sell $1.25 billion of five-year convertible notes after the market close on Monday with price talk for a fixed coupon of 0% and an initial conversion premium of 65% to 70%, according to a market source.

The deal was heard to be in the market with assumptions of 150 basis points over Libor and a 45% vol.

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

Proceeds from the new offering will be used to cover the amounts due upon the conversion or maturity of the company’s 1% convertible notes due Sept. 15, 2021.

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

However, with the pricing of the notes aggressive and the market saturated with new paper, the new paper “might trade sloppy,” a source said.

As Twitter’s latest offering was in the work, the company’s 0.25% convertible notes due 2024 were active.

“That’s no surprise,” a source said. Accounts were most likely making room for the new offering.

The 0.25% convertible notes were changing hands at 153.375 early in the session.

They traded as high as 154 in the late afternoon.

Twitter’s stock traded to a high of $78.73 and a low of $76.05 before closing the day at $77.63, an increase of 0.73%.

MannKind on deck

MannKind plans to price $150 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Underwriters were marketing the deal with assumptions of 750 bps over Libor and a 45% vol.

Using those assumptions, the deal modeled a little over 5 points cheap at the midpoint of talk.

However, the short interest in the biotech company is high at 7.06%, a source said.

MannKind is a known name in the convertibles universe and accounts are wary, a source said.

“They’ve been close to death before,” a source said.

However, the pricing was attractive, although the biotech company is a “very strange company,” another source said.

Shake Shack eyed

Shake Shack plans to sell $225 million of seven-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.25% and an initial conversion premium of 40% to 45%, according to a market source.

The deal was heard to be in the market with assumptions of 300 bps over Libor and a 45% vol.

Using those assumptions, the deal looked 0.84 point cheap at the midpoint of talk, according to a market source.

The short interest in the fast-food restaurant chain was also high at 10.12%.

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

Boingo goes private

Boingo Wireless’ 1% convertible notes due 2023 were making large gains following news Digital Colony had acquired the wi-fi provider.

The acquisition triggered the change-of-control put on the notes, a source said.

The 1% notes gained about 6 points outright.

They traded up to 99 on Monday after previously trading in the 92 to 93 range.

News broke on Monday that Digital Colony would acquire Boingo for $14 per share plus the assumption of debt for a total value of $854 million.

Boingo will be taken private following the completion of the acquisition, the companies said in a press release.

Mentioned in this article:

Beyond Meat Inc. Nasdaq: BYND

Boingo Wireless Inc. Nasdaq: WIFI

Cable One Inc. NYSE: CDAY

Ceridian HCM Holding Inc. NYSE: CDAY

Haemonetics Corp. NYSE: HAE

MannKind Corp. Nasdaq: MNKD

PennyMac Mortgage Investment Trust NYSE: PMT

Shake Shack Inc. NYSE: SHAK

Twitter Inc. NYSE: TWTR

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.