Morning Commentary: Boston Scientific, Under Armour, Five9 eyed; Becton Dickinson active

By Abigail W. Adams

Portland, Me., May 21 – The convertibles primary market’s steady parade of new deals continued on Thursday with three offerings on deck.

Boston Scientific Corp. plans to price $750 million of $100-par three-year series A mandatory convertible preferred stock, Five9 Inc. plans to price $650 million of five-year convertible notes, and Under Armour Inc. plans to sell $400 million of four-year convertible notes after the market close on Thursday.

The deals continued to model cheap based on underwriters’ assumptions, sources said. However, sources favored some deals over others.

Thursday was the day of mandie in the convertible universe as Becton, Dickinson and Co.’s $1.5 billion, or 30 million shares, of $50-par depositary shares representing a 1/20th interest in its $1,000-par three-year series B mandatory convertible preferred stock hit the secondary space.

The shares were performing well on their aftermarket debut.

Boston Scientific ‘hot’

Boston Scientific plans to price $750 million of $100-par three-year series A mandatory convertible preferred stock after the market close on Thursday with price talk for a dividend of 5.25% to 5.75% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The deal was being marketed with assumptions of 175 basis points over Libor and a 30% to 33% vol., a source said.

Using those assumptions, the deal looked about 5 points cheap at the midpoint of talk.

With no dividend on its common stock, Boston Scientific’s offering was expected to “be hot,” a source said.

Mandatory offerings carry the highest yields in the convertibles universe, another source said.

While the maturities are short, which begs the question whether or not they should be called yields, “it sure is income,” the source said.

Concurrently with the convertible preferred stock, the company plans to price a $750 million secondary offering of common stock.

Five9 eyed

Five9 plans to price $650 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.125% to 0.625% and an initial conversion premium of 30% to 35%.

The deal was heard to be marketed with assumptions of 450 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 2.125 points cheap at the midpoint of talk.

In connection with the offering, the software company plans to purchase or exchange a portion of its 0.125% convertible notes due 2023.

Under Armour downgraded

Under Armour plans to price $400 million of four-year convertible notes after the market close on Thursday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 27.5% to 32.5%.

The deal was being marketed with assumptions of 650 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 3.125 points cheap at the midpoint of talk, a source said.

However, the athletic clothing apparel company’s debut convertible notes offering comes amid a Moody’s Investors Service downgrade.

Moody’s downgraded the company’s corporate family rating to Ba3 from Ba2 and its unsecured notes to B1 from Ba2 on Thursday due to widespread store closures and weak consumer discretionary spending.

Becton Dickinson

Becton Dickinson priced $1.5 billion, or 30 million shares, of $50-par depositary shares representing a 1/20th interest in its $1,000-par three-year series B mandatory convertible preferred stock after the market close on Wednesday to yield 6% with a threshold appreciation premium of 20%.

Pricing came at the rich end of talk for a dividend of 6% to 6.5% and at the midpoint of talk for a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The depositary shares were putting in a solid performance in the secondary space even as stock sank.

They were seen at $50.25 bid, $50.55 offered versus as stock price of $239.50 early in the session.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.