Limelight convertible eyed; LendingTree skyrockets; Snap down outright, up on swap

By Abigail W. Adams

Portland, Me., July 22 – The convertibles primary market continued to roll out new deals on Wednesday, albeit at a slower pace.

In an overnight offering, Limelight Networks Inc. plans to price $100 million of five-year convertible notes after the market close on Wednesday.

The deal was priced to move, a source said.

LendingTree Inc. priced $500 million of five-year convertible notes after the market close on Tuesday.

The notes dominated activity in the secondary space on Wednesday and skyrocketed on debut.

While activity in the convertible primary market has been slow since the start of the third quarter, it is expected to heat up in the coming weeks as companies exit their earnings blackout period, a market source said.

There are multiple deals in the pipeline, although they may not surface until mid-August or September, another source said.

While there may be a temporary lull over the summer months, the convertible primary market is expected to return to its record-setting pace come fall.

While the new paper dominated activity in the secondary space, Pioneer Natural Resources Co.’s 0.25% convertible notes due 2025 remained active following an analyst upgrade earlier in the week.

Snap Inc.’s convertible notes also saw some activity with the notes down outright but up on a dollar-neutral basis following its earnings report.

Limelight in focus

Limelight Networks plans to price $100 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The overnight offering was heard to be marketed with assumptions of 800 basis points over Libor and a 40% vol.

Using those assumptions, the deal looked 8.625 points cheap at the midpoint of talk, a source said.

“It’s priced to move,” the source said.

LendingTree skyrockets

LendingTree sold $500 million of five-year convertible notes after the market close on Tuesday at par at the midpoint of talk with a coupon of 0.5% and an initial conversion premium of 30%.

Price talk was for a coupon of 0.25% to 0.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal played to a healthy mix of outright and hedge accounts, a source said.

The new paper skyrocketed on an outright and dollar-neutral basis on their secondary market debut.

The bonds traded up to 103.5 right out of the gate with stock flat, a market source said.

They continued to build premium as the session progressed, another source said.

The notes were trading at 103.5 bid, 104 offered on a swap basis versus Tuesday’s closing price of $354.76.

They climbed to 104.5 dollar-neutral late Wednesday afternoon, the source said.

Another source saw the notes up 4 points dollar-neutral at the market close.

The 0.5% notes “priced properly and were well received,” a source said.

More than $91 million of the bonds were on the tape by the late afternoon.

LendingTree stock traded to a high of $358.63 and a low of $350.37 before closing the day at $355.42, an increase of 0.19%.

Approximately $234 million of the proceeds from the new offering were used to repurchase $130.3 million of the company’s outstanding 0.625% convertible notes due 2022 in privately negotiated transactions.

The 0.625% convertible notes were repurchased at 179.5, which was 4 to 5 points above their previous trading level, a market source said.

Pioneer active

Pioneer Natural Resources’ 0.25% convertible notes due 2025 continued to see high-volume activity on Wednesday, although the notes were largely trading sideways.

The 0.25% notes were changing hands around 122.375 late Wednesday afternoon.

There was more than $25 million in reported volume about one hour before the market close.

Pioneer stock traded to a high of $103.02 and a low of $99.24 before closing the day at $102.51, a decrease of 0.19%.

While largely unchanged on the day, the 0.25% notes have gained more than 3 points outright since Monday when a Raymond James analyst upgraded the stock to “strong buy” from “outperform” and lifted their price target to $130 from $105.

Snap’s earnings

Snap’s convertible notes saw some activity on Wednesday with the notes down outright but up dollar-neutral following the camera and social media company’s second-quarter earnings report.

Snap’s 0.75% convertible notes due 2026 dropped about 6 points outright to 126.5.

The company’s recently priced 0.25% convertible notes due 2025 were also down about 6 points to 128.

Both tranches were expanding on the move down and gained about 0.5 to 0.75 point dollar-neutral, a source said.

The tranches were active with each seeing about $12 million in reported volume.

Snap stock traded to a low of $22.46 and a high of $23.79 before closing the day at $23.20, a decrease of 6.38%.

Snap reported an adjusted loss per share of 9 cents, which was in line with expectations. Revenue was $454 million, which beat analyst expectations for revenue of $439 million, CNBC reported.

However, stock traded off after the company reported widening losses and slowing user growth.

Snap priced a $1 billion issue of its 0.25% convertible notes in late April following a better-than-expected first-quarter earnings report.

Optimism around the company’s prospects enabled it to price a new offering with a lower coupon and with a shorter maturity than its outstanding convertible note.

Mentioned in this article:

LendingTree Inc. Nasdaq: TREE

Limelight Networks Inc. Nasdaq: LLNW

Pioneer Natural Resources Co. NYSE: PXD

Snap Inc. NYSE: SNAP

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