Morning Commentary: Zendesk, LivaNova convertibles hit aftermarket, trade up on debut

By Abigail W. Adams

Portland, Me., June 12 – The convertibles primary market rounded out another multi-billion-dollar week with $1.25 billion pricing over two deals late Thursday.

Zendesk Inc. priced $1 billion of five-year convertible notes and LivaNova plc sold $250 million of long five-year exchangeable notes after the market close on Thursday.

The two deals brought the weekly tally to $5.98 billion, which priced over 10 deals.

The deals were marketed on one of the ugliest days for equities since March and priced at the cheap end of talk.

However, they were still able to clear the primary market.

The new paper hit the secondary space as equities recovered from Thursday’s sell-off. Both notes were trading up on debut.

Zendesk expands

Zendesk priced $1 billion of five-year convertible notes after the market close on Thursday at par with a coupon of 0.625% and an initial conversion premium of 32.5%.

Pricing came at the cheap end of revised talk for a coupon of 0.375% to 0.625% and in line with revised talk for an initial conversion premium of 32.5%, according to a market source.

Initial price talk was for a coupon of 0.125% to 0.625% and an initial conversion premium of 32.5% to 37.5%.

The 0.625% notes dominated activity early in the session with $66 million on the tape.

They were performing well on an outright and dollar-neutral basis.

The notes were changing hands at 101.375 about one hour after the opening bell.

The notes were expanded a little more than 2 points dollar-neutral, a source said.

Zendesk stock was changing hands at $80.22, an increase of 0.63%, shortly before 11 a.m. ET.

However, the convertible notes were priced off of the VWAP on June 11, which was $82.085.

Zendesk entered into privately negotiated transactions to repurchase $425.8 million of the principal amount of its 0.25% convertible notes due 2023 for $617.6 million in cash.

There were several prints of the 0.25% notes at 145.045 prior to the market open on Friday, which appeared to be their buyback price, a source said.

LivaNova trades up

LivaNova priced $250 million of long five-year exchangeable notes after the market close on Thursday at par at the cheap end of talk with a coupon of 3% and an initial exchange premium of 30%.

Price talk was for a coupon of 2.5% to 3% and an initial exchange premium of 30% to 35%, according to a market source.

The new paper traded up to 103.75 on an outright basis with stock up about 1%.

They were expanded 2.5 points dollar-neutral, a source said.

LivaNova stock was changing hands at $46.63, a decrease of 0.65%, shortly before 11 a.m. ET.

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