Convertibles primary on fire; $3.23 billion in six deals on deck; Twitter below par

By Abigail W. Adams

Portland, Me., March 2 – The convertible bond primary market entered March like a lion and unleashed a deluge of new deals.

After pricing $1.675 billion in three deals after the market close on Monday, the primary market plans to price $3.23 billion over six deals after the market close on Tuesday, and two deals totaling $2.25 billion are on deck for Wednesday.

“Too many deals!!!” said one source. “Nuts,” said another source. “This will be a month never seen before in convert issuance,” said a third source.

The RealReal Inc. plans to price $250 million of seven-year convertible notes and Airbnb Inc. plans to sell $2 billion of five-year convertible notes after the market close on Wednesday.

New offerings from PennyMac Corp., Beyond Meat Inc., Haemonetics Corp., Ceridian HCM Holding Inc., Cable One Inc. and Fastly Inc. were on deck for after the market close on Tuesday.

The deals ranged from rich, to fair value to cheap based on underwriters’ assumptions, sources said.

The pricing remained aggressive with six of the seven deals on deck eyeing 0% coupons.

“People are annoyed by it, but the demand is there,” a source said.

Meanwhile, new paper from Shake Shack Inc., MannKind Corp. and Twitter Inc. made its aftermarket debut on Tuesday.

Their performance was mixed with Shake Shack’s new convertible notes trading up on debut, MannKind’s convertible notes volatile and Twitter’s convertible notes dropping below par.

For Wednesday

Airbnb plans to price $2 billion of five-year convertible notes after the market close on Wednesday with price talk for a fixed coupon of 0% and an initial conversion premium of 60% to 65%, according to a market source.

Morgan Stanley & Co. LLC is lead left bookrunner for the Rule 144A offering, which does not carry a greenshoe.

The RealReal plans to price $250 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Credit Suisse Securities (USA) LLC and BofA Securities Inc. are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $37.5 million.

PennyMac eyed

PennyMac plans to sell $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.

The deal was heard to be marketed with assumptions of 575 basis points over Libor and a 20% vol., a source said.

Using those assumptions, the deal looked to be fair value at the midpoint of talk.

“It’s nice to see some yield,” a source said.

However, the exchangeable notes from the low vol. REIT offered little upside.

Beyond Meat looks rich

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.

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 0.875 point rich at the midpoint of talk, a source said.

The plant-based food company is heavily shorted, a source said, with 18.43% of the float held by short-sellers.

Haemonetics on tap

Haemonetics plans to price $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.

The deal was heard to be in the market with assumptions of 275 bps over Libor and a 38% vol., a source said.

Using those assumptions, the deal looked 1.21 points cheap rich at the midpoint of talk, a source said.

Ceridian eyed

Ceridian plans to bring $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.

The deal was heard to be in the market with assumptions of 250 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk.

Cable One’s two tranches

Cable One plans to price an aggregate of $600 million 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%.

The 2026 notes were heard to be in the market with assumptions of 250 bps over Libor and a 33% vol.

The 2028 notes were heard to be marketed with assumptions of 275 bps over Libor and a 32% vol.

Twitter below par

Twitter priced $1.25 billion of five-year convertible notes after the market close on Monday at par with a coupon of 0% and an initial conversion premium of 67.5%.

Pricing came in line with talk for a fixed coupon of 0% and at the midpoint of talk for an initial conversion premium of 65% to 70%, according to a market source.

As predicted, the notes had a sloppy start in the secondary space.

The notes were changing hands at 98.375 early in the session. They continued to trade on a 98-handle throughout Wednesday’s session and were marked at 98.375 bid, 98.875 offered about one hour before the market close.

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

Twitter’s stock traded to a high of $77.10 and a low of $73.56 before closing the day at $73.67, a decrease of 5.10%.

Shake Shack outperforms

Shake Shack priced $225 million of seven-year convertible notes after the market close on Monday at par at the rich end of talk with a coupon of 0% and an initial conversion premium of 45%.

Price talk was for a coupon of 0% to 0.25% and an initial conversion premium of 40% to 45%, according to a market source.

The notes traded up on an outright and dollar-neutral basis.

They were changing hands at 102 about an hour after the opening bell and were seen changing hands at 102.5 heading into the market close.

The notes expanded upwards of 1.75 points dollar-neutral, a market source said.

Shake Shack’s stock traded to a high of $123.56 and a low of $119 before closing the day at $121.46, an increase of 3.34%.

MannKind volatile

MannKind sold an upsized $200 million, from $150 million, of five-year convertible notes after the market close on Monday at par at the midpoint of talk with a coupon of 2.5% and an initial conversion premium of 30%.

Price talk was 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.

The notes were volatile on their aftermarket debut.

They traded as high as 101.25 but came in to change hands at 99.25 about one hour after the opening bell.

The notes rebounded as the session progressed and were marked at 100.25 bid, 100.75 offered versus a stock price of $3.90, a source said.

The notes expanded about 1 point dollar-neutral.

MannKind’s stock traded to a high of $3.99 and a low of $3.67 before closing the day at $3.78, a decrease of 5.74%.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

Beyond Meat Inc. Nasdaq: BYND

Cable One Inc. NYSE: CABO

Ceridian HCM Holding Inc. NYSE: CDAY

Fastly Inc. NYSE: FSLY

Haemonetics Corp. NYSE: HAE

MannKind Corp. Nasdaq: MNKD

PennyMac Corp. NYSE: PMT

RealReal Inc. Nasdaq: REAL

Shake Shack Inc. NYSE: SHAK

Twitter Inc. NYSE: TWTR

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