Nuvasive, Air Canada on tap; 1Life Healthcare eyed; Southwest, Pioneer Natural gain

By Abigail W. Adams

Portland, Me., May 26 – The convertibles primary market returned to action in the return from the holiday weekend with one deal set to price after the market close on Tuesday and two more on deck for Wednesday.

Air Canada plans to price $400 million of five-year convertible notes and NuVasive Inc. plans to price $400 million of three-year convertible notes after the market close on Wednesday.

1Life Healthcare Inc. plans to price $250 million of five-year convertible notes after the market close on Tuesday.

The deal looked cheap, and the company had an interesting business model, sources said.

Meanwhile, the secondary space was relatively active on what is typically a slow return from the holiday weekend as equities jumped on continued optimism surrounding a Covid-19 vaccine and an economic reopening

There was about $87 million in reported volume about one hour into Tuesday’s session and $605 million heading into the market close, sources said.

Pioneer Natural Resources Co.’s 0.25% convertible notes due 2025 and Southwest Airlines Co.’s 1.25% convertible notes due 2025 saw heavy volume with both continuing to gain on an outright basis.

Under Armour Inc.’s 1.5% convertible notes due 2024 also remained active their second day in the secondary space with the notes topping par.

The pipeline

NuVasive plans to price $400 million of three-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Morgan Stanley & Co. LLC and BofA Securities Inc. are bookrunners for the Rule 144A offering, which carries a greenshoe of $50 million.

Air Canada plans to price $400 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 4.5% to 5% and an initial conversion premium of 25% to 30%, according to a market source.

J.P. Morgan Securities LLC, TD Securities Inc. and Citigroup Global Markets Canada Inc. are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $60 million.

One Medical eyed

1Life Healthcare plans to price $250 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.5% to 3% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal was heard to be marketed with assumptions of 750 bps over Libor and a 43% vol.

Using those assumptions, the deal looked about 6.5 points cheap at the midpoint of talk., a source said.

The deal was heard to be as much as 2x oversubscribed and is believed to be pricing at the midpoint or cheap end of talk.

1Life Healthcare, which does business as One Medical, went public in January with a stock price of $14.00.

Stock tanked on the heels of the overnight offering, closing Tuesday at $34.18, a decrease of 10.05%.

The membership-based primary health care company operates on a combination of in-person and remote appointments.

The company has an interesting business model and is similar to Teladoc Health Inc, sources said.

However, the company is young, making analysis of its financial record difficult.

One Medical released its first-quarter earnings report about two weeks ago, which was its second earnings report since the company went public.

The company beat analyst expectations with revenue of $78.76 million versus expectation for revenue of $74.79 million. Membership was also on the rise.

However, it had a negative EBITDA of $13.5 million.

The deal was priced appropriately for the market, a source said.

Pioneer Natural gains

Pioneer Natural Resources’ 0.25% convertible notes due 2025 were among the major volume movers of Tuesday’s session with the notes continuing to gain on an outright basis.

The 0.25% notes were up about 2 points outright to change hands at 109.625 with stock up more than 3% early in the session.

The notes continued to trade around 109 as stock came in headed into the afternoon.

There was more than $34 million on the tape heading into the market close.

Pioneer Natural Resources stock traded to a high of $96.73 and a low of $93.35 before closing the day at $93.72, an increase of 1.4%.

The oil and gas company was continuing to post gains as the rally in crude oil futures continued on an expected uptick in demand.

WTI crude oil futures rose to settle at $34.35, an increase of $1.10 or 3.3%.

The company also announced that it was upsizing its tender offer for three series of notes from $500 million to $724.59 million, which was the amount tendered as of May 22, according to a company news release.

Southwest in focus

Southwest Airlines’ 1.25% convertible notes due 2025 jumped on an outright basis as stock soared.

The 1.25% notes gained more than 7 points to trade up to a 112 handle in the late afternoon.

With more than $52 million in reported volume, the notes were the most actively traded by dollar amount in the secondary space.

Southwest stock traded to a high of $32.94 and a low of $31.44 before closing the day at $32.52, an increase of 12.64%.

Stock skyrocketed alongside the broader airline industry on Tuesday as travel restrictions ease amid a slow reopening of the economy.

Southwest stock was also making gains after a UBS analyst upgraded the stock to “buy” from “neutral.”

Under Armour tops par

Under Armour’s 1.25% convertible notes due 2024 remained active on Tuesday with the notes topping par.

The 1.25% notes gained about 3 points outright to trade up to 102.125 in the late afternoon.

The bonds saw more than $30 million in reported volume by the late afternoon.

Under Armour stock traded to a high of $7.92 and a low of $7.55 before closing the day at $7.86, an increase of 6.5%.

The 1.25% notes made their aftermarket debut on Friday. While they expanded on a dollar-neutral basis, the notes closed Friday below par.

Mentioned in this article:

1Life Healthcare Inc. Nasdaq: ONEM

Air Canada TSX: AC

NuVasive Inc. Nasdaq: NUVA

Pioneer Natural Resources Co. NYSE: PXD

Southwest Airlines Co. NYSE: LUV

Under Armour Inc. NYSE: UA

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