Morning Commentary: Ford megadeal, IMAX, Rapid7, Centennial on tap; DraftKings expands

By Abigail W. Adams

Portland, Me., March 16 – The convertibles market was again awash in new paper with four deals totaling $2.85 billion slated to price after the market close and $1.45 billion in two deals making their aftermarket debut.

Ford Motor Co. plans to price $2 billion of five-year convertible notes (Ba2//BB+), IMAX Corp. plans to price $200 million of five-year convertible notes, Rapid7 Inc. plans to sell $500 million of six-year convertible notes and Centennial Resource Development Inc. plans to price $150 million of seven-year exchangeable notes after the market close on Tuesday.

Meanwhile, as market players eyed the new deals in the works, new paper from Magnite and DraftKings Inc. hit the secondary space.

DraftKings’ new notes were trading up on an outright and dollar-neutral basis.

Ford’s megadeal

Ford plans to price $2 billion of five-year convertible notes after the market close on Tuesday with price talk for a fixed coupon of 0% and an initial conversion premium of 40% to 45%, according to a market source.

The deal was heard to be in the market with assumptions of 225 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 1.99 points cheap at the midpoint of talk.

IMAX eyed

IMAX plans to price $200 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be in the market with assumptions of 450 bps over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of talk.

Centennial’s exchange

Centennial Resource plans to sell $150 million of seven-year exchangeable notes after the market close on Tuesday with price talk for a coupon of 2.75% to 3.25% and an initial exchange premium of 30% to 35%, according to a market source.

The notes will be issued by Centennial Resource Production LLC and exchangeable for Centennial Resource Development shares.

The deal was heard to be in the market with assumptions of 725 bps over Libor and a 40% vol.

Using those assumptions, the deal looked about 4 points cheap at the midpoint of talk.

“Anything with a 3% coupon should do well,” a source said.

Rapid7’s buyback

Rapid7 plans to price $500 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.25% and an initial conversion premium of 30% to 35%, according to a market source.

Concurrently, the company will repurchase a portion of its 1.25% convertible notes due 2023 in privately negotiated transactions.

Magnite at the mids

Magnite priced $350 million of five-year convertible notes after the market close on Monday at par at the midpoint of talk with a coupon of 0.25% and an initial conversion premium of 40%.

Price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

DraftKings expands

DraftKings sold an upsized $1.1 billion of seven-year convertible notes after the market close on Monday at par with a coupon of 0% and an initial conversion premium of 40%.

Pricing came at the rich end of talk for a coupon of 0% to 0.5% and at the midpoint of talk for an initial conversion premium of 37.5% to 42.5%, according to a market source.

The new paper was changing hands between 102.5 and 103 early in the session, a source said.

They expanded 1.5 to 2 points dollar-neutral.

DraftKings’ stock was changing hands at $68.90, an increase of 1.77%, shortly before 11 a.m. ET.

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