Hope on tap; secondary trading volume light; Teladoc expands; Five9 quiet; Dish contracts

By Abigail W. Adams

Portland, Me., May 7 – The convertibles primary market launched the week with the launching of a new convertible notes offering.

Hope Bancorp Inc. plans to price $200 million of 20-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 22.5% to 27.5%.

BofA Merrill Lynch is the sole bookrunner for the Rule 144A deal, which carries a greenshoe of $30 million.

In connection with the offering, Hope Bancorp will repurchase up to $100 million of common stock.

Hope Bancorp is the holding company of the Bank of Hope, the only regional Korean-American bank in the United States

While the primary market prepared a new deal, the secondary space was off to a Monday start with low trading volume throughout the session.

Equities put in a strong performance on Monday. However, the convertible space was in “a wait and see mode” early in the session, a market source said. “It’s kind of a ‘what do we want to do today?’ type of day.”

Trading activity remained light throughout the session with about $257 million on the tape by late afternoon.

Teladoc Inc.’s newly priced 1.375% convertible notes due 2025 were the major volume mover of the session with about $12.5 million on the tape by late afternoon.

The 1.375% notes continued to improve on an outright and dollar-neutral basis.

While Teladoc’s outstanding 3% convertible notes due 2022 were active early in the session, they were quiet in the afternoon with only about $3 million bonds traded.

Five9 Inc.’s newly priced 0.125% convertible notes due 2023 were slow to trade on Monday with $5 million on the tape by late afternoon. The notes were slightly improved dollar neutral, a market source said.

The new paper from Teladoc and Five9 made its market debut on Friday.

Dish Network Corp.’s 2.375% convertible notes due 2024 were active on Monday and contracting, a market source said. While quiet on Monday, Dish’s 3.375% convertible notes were active on Friday with the notes down 2.5 points dollar-neutral on the month.

The Dish convertible notes are sensitive to the high-yield market where the telecommunication sector has been soft. Dish will report earnings prior to the market open on Tuesday.

Teladoc expands

After dominating trading activity in the secondary space on Friday, new paper from Teladoc and Five9 saw light trading volume on Monday.

While only a fraction of the trading activity they saw on Friday, Teladoc’s 1.375% notes were the volume leader of Monday’s session with about $3 million on the tape early in the session and $12.4 million on the tape by late afternoon.

The 1.375% notes were up on an outright and dollar-neutral basis during Monday’s session. They were seen trading up to 102.25 outright and were up 0.375 point on swap early in the session, a market source said.

They continued to improve in the late afternoon and were seen trading just south of 103.5 versus an equity price of $43.80. They were seen up 0.5 point dollar-neutral in the late afternoon.

“And that’s after everyone poo-pooed them,” a market source said.

Teladoc priced an upsized $250 million of the 1.375% convertible notes after the market close Thursday.

Pricing came at the cheap end of talk for a coupon of 0.875% to 1.375% and towards the cheap end of talk for a conversion premium of 27.5% to 32.5%.

The notes modeled rich at the mid-point of talk, sources said. They hovered just above par out of the gate on Friday but expanded about 0.5 point dollar-neutral before Friday’s close.

While Teladoc’s 3% notes were active early in the session, they were quiet in the afternoon. They were seen trading at 122 shortly after the opening bell.

Teladoc stock closed Monday at $44.35, an increase of 5.09%.

Five9 day two

After dominating secondary market activity on Friday, Five9’s newly priced 0.125% convertible notes due 2023 were slow to trade on Monday.

They were not seen on the tape early in the session and only about $5 million of the bonds traded by late afternoon.

The notes traded down about 1 point to just south of 101 versus an equity price of $32.28. They were seen up about 0.25 point dollar-neutral, a market source said. Five9 stock closed Monday at $32.1, an increase of 1.61%.

The trading activity is typical of new issues with the new paper in focus on their debut then trading activity quieting down, a market source said.

“It’s new issue day and then it’s done,” the source said. “Everyone did what they needed to do.”

Dish contracts

With $8 million of bonds on the tape by late afternoon, Dish’s 2.375% convertible notes due 2024 were among the volume leaders on Monday. The 2.375% notes were seen trading at 85.5 versus an equity price of $33.56.

They contracted about 0.75 point dollar-neutral. Dish stock closed Monday at $33.9, an increase of 1.53%.

While not active on Monday, Dish’s 3.375% notes were active on Friday with the notes wrapped around 90. The 3.375% notes were contracted about 2.5 points on the month, a market source said.

Dish’s convertible bonds are sensitive to the high-yield market and the high-yield market has been soft in the telecommunications space, a market source said.

Returns for the telecommunications sector in the high-yield market are negative 0.37% for the quarter and negative 0.40% for the year, according to data compiled by Advantage Data.

Dish will announce earnings prior to the market open Tuesday. Analysts have increased their earnings estimates for Dish in the run up to the report, according to Zacks Equity Research.

Mentioned in this article:

Dish Network Corp. Nasdaq: DISH

Five9 Inc. Nasdaq: FIVN

Hope Bancorp Inc. Nasdaq: HOPE

Teladoc Inc. NYSE: TDOC

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