NiSource on deck; convertibles secondary ‘anemic’; Nuance active; Ford, Li Auto down

By Abigail W. Adams

Portland, Me., April 12 – While sources were unsure what to expect for new deal activity in the convertibles market in the coming week as earnings season kicks off, one deal was on deck.

NiSource Inc. plans to price $750 million of three-year par-of-$100 equity units after the market close on Tuesday with price talk for a yield of 7.25% to 7.75% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Wells Fargo Securities, LLC are bookrunners for the registered offering, which carries a greenshoe of $112.5 million.

Meanwhile, the secondary space started the week off slowly with equities down slightly following another record-setting week last week.

“It’s anemic out there,” a source said.

There was $38 million on the tape about one hour after the opening bell and $320 million about one hour before the market close, sources said.

Nuance Communications Inc.’s deep-in-the-money convertible notes were active following news Microsoft Corp. would buy out the company in an all-cash transaction valued at $19.7 billion.

However, the buyout “was not a winner” for holders with little money made in the takeout, a source said.

Ford Motor Co.’s 0% convertible notes due 2026 remained major volume movers with the notes coming in on an outright and dollar-neutral basis.

Li Auto Inc.’s recently priced 0.25% convertible notes due 2028 gave up much of their outright gains on Monday with the notes returning to par although they were largely unchanged dollar-neutral.

Nuance’s buyout

Nuance’s convertible notes were active following news Microsoft would buy the company.

While the deep-in-the-money convertible notes jumped on an outright basis, there was little money made off of the acquisition, a source said.

“They’re basically pushing paper around,” the source said.

The artificial intelligence and speech-recognition software company’s 1.25% convertible notes due 2025 shot up 37 points outright.

They were changing hands at 272.5 early in Monday’s session and were changing hands at 271 heading into the market close.

The 1% convertible notes due 2035 gained 27 points outright. They were changing hands at 219 heading into the market close.

Nuance’s stock traded to a high of $53.93 and a low of $52.74 before closing the day at $52.85, an increase of 15.95%.

The notes were trading according to the takeout matrix triggered by the acquisition, which had little upside for holders, a source said.

Microsoft announced on Monday that it would acquire the company for $56 per share, including debt.

Ford weakens

Ford’s 0% convertible notes due 2026 continued to dominate the tape. However, the notes were weak on Monday.

The 0% convertible notes were coming in on an outright and dollar-neutral basis.

They were changing hands at 101 late Monday afternoon.

The notes contracted about 0.25 point dollar-neutral, a source said.

Ford’s stock traded to a high of $12.55 and a low of $12.32 before closing the day at $12.38, a decrease of 1.04%.

After struggling below par the last week of March, the notes traded as high as 103 last week.

Li Auto at par

Li Auto’s recently priced 0.25% convertible notes due 2028 gave up much of their outright gains on Monday.

After trading north of 103 on Friday, the 0.25% notes dropped back down to par with the Beijing-based electric vehicle manufacturer’s American Depositary Shares off more than 4%.

The notes were unchanged to contracted 0.25 point dollar-neutral, a source said.

Li Auto’s ADSs traded to a high of $22.72 and a low of $21.60 before closing the day at $21.78, a decrease of 4.31%.

The company announced Monday that underwriters had exercised the $112.5 million greenshoe in full, lifting the total size of the deal to $862.5 million.

Li Auto priced the 0.25% notes on April 7.

Mentioned in this article:

Ford Motor Co. NYSE: F

Li Auto Inc. Nasdaq: LI

NiSource Inc. NYSE: NI

Nuance Communications Inc. Nasdaq: NUAN

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