U.S. convertibles primary market whirls in on Monday with at least $4.1 billion of new paper

Chicago, Nov. 15 – Four domestic issuers announced deals on Monday for at least $4.1 billion of new convertible paper, with one deal set to price late in the day.

NCL Corp. Ltd., a subsidiary of Norwegian Cruise Line Holdings Ltd., turned up with an $800 million new offering after the morning rush.

Unity Software Inc. also joined the week’s calendar with an announced jumbo $1.5 billion convertible deal, a debut for the issuer.

From the morning’s announced business, DigitalOcean, Inc. was moving toward wrapping pricing on a deal that started at $900 million but had been reported by a source as upsized.

Marathon Digital Holdings, Inc., a Bitcoin miner, also announced out of the gate Monday morning, is working to sell $500 million of new convertibles.

NCL sails again

NCL Corp. is back in the primary market with a new offering of exchangeable notes after issuing debt regularly since the start of the Covid-19 pandemic to tide it over while ships were docked and as cruising was restarted.

The cruise line announced a new offering of $800 million of exchangeable senior notes due 2027 with a greenshoe for $120 million.

A market source noted that talk is for a coupon between 1.125% to 1.625% and an initial exchange premium of 37.5% to 42.5%.

Assumptions in the market are for 450 basis points over Libor and a 42% vol., according to another market source.

At the midpoint of talk, with a 1.375% coupon and an initial exchange premium of 40%, the six-year paper was modeling 2.05 points cheap.

NCL plans to partially use the notes for privately negotiated repurchases with noteholders of the company’s 6% exchangeable due 2024. The notes were sold at blistering rates in May of 2020 when the pandemic had just started and no one knew how long ships would be waylaid at shore.

Proceeds will also be used for general corporate purposes.

Barclays, Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are working as bookrunners for the Rule 144A offering.

Unity’s mega debut

Unity Software appeared with a megadeal as its first convertible note offering.

The San Francisco-based company intends to sell $1.5 billion of convertible notes and an option for an additional $225 million.

A market source noted that talk on the notes was for a coupon of 0% to 0.25% and an initial conversion premium of 47.5% to 52.5%.

Assumptions are for 200 bps over Libor and a 42% vol., according to a source.

At the midpoint of talk with a 0.125% coupon and a 50% initial conversion premium, the deal was modeling 1.35 points cheap.

After capped call transactions, the company plans to use the proceeds for general corporate purposes and for acquisitions or strategic investments in complementary businesses or technologies.

The Rule 144A deal is being sold by Goldman Sachs and Morgan Stanley & Co. LLC.

DigitalOcean upsizes

DigitalOcean announced a $900 million deal of new five-year convertibles notes that were being marketed with a 0% to 0.5% coupon and an initial conversion premium that was expected to be between 40% and 45%.

Playing to big demand, with full terms not yet released, a market source told Prospect News that the deal had been upsized to $1.3 billion with a similarly upsized $200 million greenshoe (from $135 million).

The coupon is expected to print at 0%, and the initial conversion premium is said to have been revised and floated upward into the 45% to 50% area.

JPMorgan, Goldman Sachs and Morgan Stanley are active bookrunners.

Marathon

Bitcoin miner Marathon Digital Holdings will join the calendar as $500 million of 1% convertible notes with an initial conversion premium cited at 35%.

The notes were in the Monday morning market with a coupon that could come between 0.75% and 1.25%, and the initial conversion premium is expected between 32.5% and 37.5%.

The deal was circulating with assumptions of 550 bps over Libor and a 45% vol., a market source said.

Using the 1% coupon and an announced 35% conversion premium, the deal was modeling 1.14 points cheap.

The offering has a $75 million greenshoe.

Jefferies LLC is working as the bookrunner.

Mentioned in this article:

DigitalOcean, Inc. NYSE: DOCN

Marathon Digital Holdings, Inc. Nasdaq: MARA

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH

Unity Software Inc. Nasdaq: U

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