Morning Commentary: SmileDirectClub, MakeMyTrip, Pebblebrook convertible notes eyed

By Abigail W. Adams

Portland, Me., Feb. 4 – The new deal activity sources were expecting throughout the week came on Thursday with three deals on deck.

SmileDirectClub Inc. plans to price $350 million of five-year convertible notes, MakeMyTrip Ltd. plans to price $175 million of seven-year convertible notes and Pebblebrook Hotel Trust plans to sell a $175 million add-on to its 1.75% convertible notes due 2026 after the market close on Thursday.

The new paper continued to model cheap based on underwriters’ assumptions; however, the terms remained aggressive.

SmileDirectClub eyed

SmileDirectClub plans to sell $350 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be marketed with assumptions of 400 basis points over Libor and a 54% vol., according to a market source.

Using those assumptions, the deal looked 4.59 points cheap at the midpoint of talk.

However, another source pegged assumptions at 600 bps over Libor and a 45% vol., which looked 0.25 point rich at the midpoint of talk.

The oral care business is in a competitive industry and its balance sheets did not look good, a source said.

The name is also heavily shorted with a short interest of 27.59%, a source said.

MakeMyTrip looks cheap

MakeMyTrip plans to price $175 million of seven-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be marketed with assumptions of 700 bps over Libor and a 42% vol., a source said.

Using those assumptions, the deal looked 2.41 points cheap at the midpoint of talk.

Pebblebrook add-on

Pebblebrook Hotel plans price a $175 million add-on to its 1.75% convertible notes due 2026 after the market close on Thursday with price talk for a reoffer price of 104.5 to 105, according to a market source.

The add-on comes a little over one month since Pebblebrook priced a $500 million issue of the 1.75% notes.

The initial offering was marketed with assumptions of 525 bps over Libor and a 35% vol.

However, credit has tightened and vol. has increased since the initial offering, a source said.

One source pegged assumptions for the add-on at 450 bps over Libor and a 45% vol., which modeled out to 9.48 points cheap, which is roughly where the 1.75% notes have been trading, a source said.

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