Morning Commentary: Teladoc, PetIQ, Colliers convertibles on tap; Plug Power, Veeco price

By Abigail W. Adams

Portland, Me., May 14 – The convertibles primary market’s new deal flow continued on Thursday with three more overnight offerings on deck and two new deals making their aftermarket debut.

Teladoc Health Inc. plans to price $800 million of seven-year convertible notes, Colliers International Group plans to price $200 million of five-year convertible notes, and PetIQ, Inc. plans to sell $125 million of six-year convertible notes after the market close on Thursday.

The deals modeled cheap based on underwriters’ assumptions, sources said.

However, several of the recent deals that modeled cheap continued to cheapen in the secondary.

“Things are getting backed up,” a source said.

Meanwhile, Plug Power Inc. and Veeco Instruments Inc. were able to clear the primary market, despite a brutal day for equities on Wednesday and the poor performance of several recent deals in the secondary space.

However, both deals priced cheap with one downsizing.

The new paper from Plug and Veeco were not active early Thursday as equities extended their losses.

Teladoc eyed

Teladoc Health plans to price $800 million of seven-year convertible notes after the market close on Thursday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 35% to 40%.

Underwriters were marketing the deal with assumptions of 500 basis points over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked about 1.5 points cheap at the midpoint of talk, a source said.

Colliers looks cheap

Colliers International Group plans to price $200 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 30% to 35%.

Underwriters were marketing the Rule 144A and Regulation S deal with assumptions of 525 bps over Libor and a 30% vol., according to a market source.

Using those assumptions, the deal looked 8.875 points cheap at the midpoint of talk.

However, the borrow on the Toronto-based company’s equity “might be a little tough,” which would erode the cheapness of the deal, a source said.

Factoring in some difficulty with the borrow, the deal may be more like 5 points cheap at the midpoint of talk, the source said.

PetIQ on deck

PetIQ plans to sell $125 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 25% to 30%.

The deal was being marketed with assumptions of 800 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 9 points cheap at the midpoint of talk.

Plug Power prices

Plug Power priced $200 million of five-year convertible notes after the market close on Wednesday at the cheap end of talk at par with a coupon of 3.75% and an initial conversion premium of 22.5%, according to a Thursday press release.

The notes were talked with a coupon of 3.25% to 3.75% and an initial conversion premium of 22.5% to 27.5%, as previously reported.

The offering was the first convertible green bond marketed in the United States with proceeds to be used to fund the hydrogen fuel cell turnkey manufacturer’s green initiatives.

The new paper was not active early Thursday, a source said.

Veeco downsizes

Veeco Instruments priced a downsized $125 million of seven-year convertible notes after the market close on Wednesday at the cheap end of talk with a coupon of 3.75% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 3.25% to 3.75% and an initial conversion premium of 32.5% to 37.5%, as previously reported.

The greenshoe was also reduced to $18.75 million. The initial size of the offering was $150 million with a greenshoe of $22.5 million.

While the notes were slow to trade early Thursday, they were seen changing hands as low as 98 early in the session.

However, Veeco Instruments’ 2.7% convertible notes due 2023 were active with more than $7 million in reported volume.

The notes were printing at 92, which may be the buyback price for the notes, a source said.

Approximately $81.2 million of the net proceeds from Veeco’s new offering will be used to repurchase $88.3 million of the principal amount of the 2.7% convertible notes due 2023.

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