Morning Commentary: BlackBerry convertible offering eyed; BrightSpring on deck

By Abigail W. Adams

Portland, Me., Jan. 24 – The convertibles primary market is poised for a decent week of new deal activity, a positive sign with the pace expected to accelerate as issuers emerge from earnings blackouts, sources said.

BlackBerry Ltd. plans to price $160 million of five-year convertible notes after the market close on Wednesday.

The small refinancing deal was wall-crossed but modeled cheap based on underwriters’ assumptions, sources said.

BrightSpring Health Services Inc. is on deck with its $400 million offering of $50-par three-year tangible equity units, which is slated to price post-close Thursday.

Meanwhile, it was a relatively active start to the day in the convertibles secondary space as equity indexes restarted their rally on the heels of positive earnings and in anticipation of a strong GDP print on Thursday.

The Dow Jones industrial average was up 88 points, or 0.22%, the S&P 500 index was up 0.61%, the Nasdaq Composite index was up 1.04% and the Russell 2000 index was up 0.26% shortly before 11 a.m. ET.

There was $133 million in reported volume; however, there was a wide range of names in play with few issues seeing concentrated trading activity.

BlackBerry’s refinancing

BlackBerry plans to price $160 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 2.75% to 3.25% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 600 basis points over SOFR and a 42% vol.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk, a source said.

However, the small refinancing deal was wall-crossed and already mostly spoken for.

Proceeds from the offering will be used to fund the repayment or repurchase of the company’s outstanding $150 million 1.75% extendible convertible debentures due Feb. 15, 2024.

BrightSpring on deck

BrightSpring’s $400 million offering of $50-par three-year tangible equity units are slated to price after the market close Thursday concurrently with the company’s IPO.

The tangible equity units are talked with a dividend of 6.25% to 6.75% and a threshold appreciation premium of 17.5% to 22.5%.

The tangible equity units are being marketed with assumptions of 600 bps over SOFR and a 40% to 37% vol. skew.

While the lack of history as a public company made valuations difficult, sources pegged the offering between 2 to 3 points cheap at the midpoint of talk.

However, the real importance is being placed on the valuation of the equity with the marketed IPO range $15 to $18, a source said.

The concurrent pricing of the IPO will complicate playing the units on hedge.

“It’ll be a pain,” a source said. “It handcuffs trading.”

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