Morning Commentary: Dick’s, Coherus offerings eyed; Burlington, Sabre, Natera trade up

By Abigail W. Adams

Portland, Me., April 14 – The onslaught of overnight deals in the convertibles market continued on Tuesday with two more offerings on deck.

Dick’s Sporting Goods, Inc. plans to price $500 million of five-year convertible notes and Coherus Biosciences, Inc. plans to sell $200 million of six-year convertible notes after the market close on Tuesday.

As market players eyed the new deals in the works, $1.25 billion of new paper hit the secondary space.

Burlington Stores Inc. priced $700 million of five-year convertible notes, Natera Inc. priced $250 million of seven-year convertible notes and Sabre Corp. priced an upsized $300 million of five-year exchangeable notes after the market close on Monday.

The new paper was in focus with all expanding on their secondary market debut.

Dick’s looks cheap

Dick’s Sporting Goods plans to price $500 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 30% to 35%, according to a market source.

Using a credit spread of 800 basis points over Libor and a 40% vol., the deal modeled 5.75 points cheap at the midpoint of talk, a source said.

However, another source pegged assumptions at 1,200 bps over Libor and a 45% vol., which modeled about 0.5 point cheap.

The company recently furloughed nearly all of its employees, suspended its dividend and drew down $1.2 billion from its revolving credit facility.

With a market cap of $2 billion, “I thought using 1,200 bps was being liberal,” the source said.

Coherus talks

Coherus Biosciences plans to price $200 million of six-year convertible notes after the market close on Tuesday with price talk for a yield of 1.75% to 2.25% and an initial conversion premium of 25% to 30%, according to a market source.

Using assumptions of 750 bps over Libor and a 45% vol., the deal modeled about 5.6 points cheap at the midpoint of talk, a source said.

However, the borrow on the stock is difficult.

Burlington trades up

Burlington Stores priced $700 million of five-year convertible notes after the market close on Monday at par at the rich end of talk with a coupon of 2.25% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The 2.25% convertible notes skyrocketed out of the gate.

The notes were changing hands between 104 to 105.5 on an outright basis with about $49 million in reported volume about one hour into the session.

They were expanded about 3.25 points dollar-neutral, a market source said.

Burlington stock was changing hands at $172.84, an increase of 3.45%, shortly before 11 a.m. ET.

Natera expands

Natera sold $250 million of seven-year convertible notes after the market close on Monday at par to yield 2.25% with an initial conversion premium of 30%.

Pricing came at rich end of price talk for a coupon of 2.25% to 2.75% and at the midpoint of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The notes were changing hands around 103.5 early in the session.

Natera stock was changing hands at $31.50, an increase of 5.56%, shortly before 11 a.m. ET.

Sabre upsizes

Sabre priced an upsized $300 million of five-year exchangeable notes after the market close on Monday at par with a coupon of 4% and an initial exchange premium of 32.5%, according to a company news release.

Pricing came richer than initial price talk for a coupon of 4.5% to 5% and an initial exchange premium of 22.5% to 27.5%, according to a market source.

The greenshoe was also upsized to $45 million.

The initial size of the offering was $250 million with a greenshoe of $37.5 million.

The notes dominated activity in the secondary space.

They traded as high as 107 shortly after the opening bell but came in alongside stock as the session progressed.

The notes were changing hands between 104 to 105.

They were also expanded 3.25 points dollar-neutral, a market source said.

Sabre stock traded as high as $6.44 but was changing hands at $6.09, an increase of 2.44%, shortly before 11 a.m. ET.

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