BlackBerry convertible offering eyed; BrightSpring on deck; high-grade names active

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 on Thursday.

Meanwhile, it was a relatively active day in the convertibles secondary space on a volatile day for equities.

Equity indexes resumed their rally early in the session on the heels of positive earnings and in anticipation of a strong GDP print on Thursday.

However, selling pressure took hold as the session progressed with indexes closing the day mixed.

The Dow Jones industrial average closed Wednesday down 99 points, or 0.26%, the S&P 500 index closed up 0.08%, the Nasdaq Composite index closed up 0.36% and the Russell 2000 index closed down 0.70%.

High-grade issues continued to dominate the tape with Evergy Inc.’s 4.5% convertible notes due 2027 (Baa2/BBB) and Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB) again in focus.

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.

BlackBerry’s stock plummeted on the heels of the convertible notes offering.

Stock sank to a new 52-week low of $2.85 and traded to a high of $3.25 before closing at $2.93, a decrease of 17.46%.

BrightSpring on deck

BrightSpring’s $400 million offering of $50-par three-year tangible equity units are slated to price after the market close on 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.”

High-grade trades

It was another day of high-grade trades in the convertibles secondary space with Evergy’s 4.5% convertible notes due 2027 and Duke Energy’s 4.125% convertible notes due 2026 again volume leaders.

Evergy’s 4.5% convertible notes due 2027 were moving alongside stock.

They traded as high as 101.25 early in the session versus a stock price of $50.04, according to a market source.

However, the notes leaked into the close as stock turned negative with the notes seen trading at 100.75 in the late afternoon.

There was $30 million in reported volume.

Evergy’s stock traded to a high of $50.59 and a low of $49.32 before closing at $49.35, down 1.38%.

Duke Energy’s 4.125% convertible notes due 2026 were relatively unchanged with the notes continuing to trade on a 99-handle.

The 4.125% notes were wrapped around 99.5 throughout the session.

There was $15 million in reported volume.

Duke Energy’s stock traded to a low of $94.15 and a high of $96.14 before closing at $94.54, off 1.08%.

Mentioned in this article:

BlackBerry Ltd. NYSE: BB

Duke Energy Corp. NYSE: DUK

Evergy Inc. Nasdaq: EVRG

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