New Relic, Alteryx convertibles on tap; market eyes Twilio, Vocera Communications

By Abigail W. Adams

Portland, Me., May 14 – The convertibles primary market jump-started the week with the launch of four new deals. Two new convertible notes offerings totaling $560 million are expected to price after the market close on Monday with two more offerings totaling $635 million on tap to price after the market close on Tuesday.

Twilio Inc. plans to price $435 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%, according to a market source.

Vocera Communications Inc. plans to price $125 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 30% to 35%, according to a market source.

The deals model cheap and are expected to do well, sources said.

Alteryx, Inc. intends to sell $200 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 42.5% to 47.5%, according to a market source.

J.P. Morgan Securities LLC and Goldman Sachs & Co. are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $30 million.

New Relic Inc. plans to price $435 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 25% to 30%, according to a market source.

Morgan Stanley & Co. LLC and Goldman Sachs are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $65.25 million.

While the primary market was active preparing new deals, trading volume in the secondary market was light.

However, NXP Semiconductors NV’s 1% convertible notes due 2019 was a volume leader on Monday with the convertible notes climbing alongside the stock as China reinitiates its review of Qualcomm’s takeover bid of the company.

Twilio oversubscribed

Twilio’s $435 million offering of convertible notes was in hot demand during the subscription process and was said to be 2x oversubscribed by mid-afternoon, a market source said.

“It should do well,” the source said.

The deal is being marketed with a credit spread of 225 basis points and a 40% vol. Using those assumptions, the deal models 1 point to 1.5 points cheap.

The credit assumption is tight, a market source said. “I think they’re being aggressive” with the credit, the source said.

With a credit spread of 375 bps over 45% vol., the deal models out to fair value, the source said.

However, “the universe loves companies like Twilio,” and even at fair value the convertible bonds will most likely trade up, the source said.

Twilio is a San Francisco-based cloud communications platform service company. The deal comes with a call spread.

Twilio stock has spiked in the past year, which may be a deterrent for outright buyers, but “it would be a great put” for hedge guys, a market source said.

There are rumors that Salesforce is eyeing Twilio for acquisition, which resurfaced as recently as last week.

Salesforce revealed that it owns 888,517 shares of Twilio in February, which is a $46 million investment based on Monday’s closing price of $52.52.

The convertible notes will have cash takeover protection.

Vocera’s deal

While Vocera Communications is a small company with a $725 million market cap, the convertible notes offering has “all the fixings” of a good deal, a market source said.

Price talk for the $125 million offering is for a coupon of 1.25% to 1.75% and an initial conversion premium of 30% to 35%. “People like it on the cheap,” another source said.

The deal is being marketed with a credit spread of 325 bps and a 35% vol. With those assumptions, the deal models a little over 1 point cheap at the midpoint of talk, a market source said.

“It’s got good vol., good credit metrics, good borrow, and it’s a good industry. It’s got all the fixings,” the source said.

Vocera is a San Jose, Calif.-based communications solutions provider for mobile workers in a variety of industries.

NXP active

NXP’s 1% convertible notes due 2019 were a volume leader on an otherwise quiet day in the convertibles secondary space on Monday with the notes climbing alongside the stock.

The 1% convertible notes jumped 6 points outright to trade north of 121 as the company’s stock shot up more than 12%. NXP stock closed Monday at $110.74, an increase of 11.85%.

NXP’s convertible notes and stock have whipsawed with headlines of Qualcomm’s stop-and-go efforts to acquire the company.

After Broadcom’s hostile takeover bid of Qualcomm was nixed by president Donald Trump on national security grounds, Qualcomm’s acquisition of NXP was again placed in doubt with China’s regulatory authority expressing concern about the deal.

The convertible notes dropped to the 113 to 114 range in early May as stock dropped 10% after NXP reported a large first-quarter earnings miss and did not provide future guidance due to its pending acquisition.

NXP convertible notes and stock shot up during Monday’s session after news broke that China was reinitiating its review of the merger.

China’s review of the merger comes as Trump works to lift the sanctions placed on Shanghai-based telecommunications company ZTE.

Mentioned in this article:

Alteryx, Inc. NYSE: AYX

New Relic Inc. NYSE: NEWR

NXP Semiconductors NV Nasdaq: NXPI

Twilio Inc. NYSE: TWLO

Vocera Communications Inc. NYSE: VCRA

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