Morning Commentary: Market eyes DexCom, Electronics for Imaging, Liberty Media offerings

By Abigail W. Adams

Portland, Me., Nov. 27 – While markets remain volatile, the convertibles primary market continued to test the waters with three deals on deck.

Electronics For Imaging Inc. plans to price $130 million of five-year convertible notes, DexCom Inc. plans to sell $750 million of five-year convertible notes and Liberty Media Corp. plans to price $350 million of exchangeable debentures due 2048 after the market close on Tuesday.

While DexCom was seen at fair value, Electronics For Imaging and Liberty Media’s offerings were seen as cheap based on underwriters’ assumptions.

The names are well known in the convertibles space, and the deals are expected to do well, a source said.

Meanwhile, secondary trading was light with few names seeing more than $2 million in volume, a market source said.

“Everyone’s focused on the new deals,” the source said.

DexCom on tap

DexCom plans to price $750 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 32.5% to 37.5%.

The deal was heard to be marketed with a credit spread of 275 basis points over Libor and a 40% vol., according to a market source.

The deal appeared to be fair value at the midpoint of talk, sources said.

The borrow on the stock “was a little funky” on Tuesday, a market source said.

However, it was primarily because of the demand caused by the convertible notes offering with the borrow expected to improve, the source said.

Electronics For Imaging

Electronics For Imaging plans to sell $130 million of five-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 30% to 35%.

The deal was heard to be marketed with a credit spread of 350 bps over Libor and a 40% vol., according to a market source.

The deal modeled 4.87 points cheap at the midpoint of talk, a source said.

Another source pegged the deal 2.5 points to 4 points cheap.

Liberty Media to price

Liberty Media plans to price $350 million of exchangeable debentures due 2048 after the market close on Tuesday with price talk for a coupon of 1.25% to 1.75% and an initial exchange premium of 27.5% to 32.5%.

The debentures are exchangeable into shares of Live Nation Entertainment, Inc.

The deal was heard to be marketed with a credit spread of 225 bps over Libor and a 30% vol., according to a market source.

The deal modeled about 1.71 points cheap at the midpoint of talk, a source said.

Another source pegged the deal between 1 point and 2 points cheap.

“This is a good one,” a source said. “These always do well.”

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