Morning Commentary: Revance convertibles expand; i3 Verticals, Barclays synthetic eyed

By Abigail W. Adams

Portland, Me., Feb. 12 – New convertibles paper was in focus on Wednesday with one new deal pricing and two more on deck for after the market close.

Revance Therapeutics Inc. priced an upsized $250 million of seven-year convertible notes after the market close on Wednesday.

The new paper dominated activity in the secondary space and saw a large dollar-neutral expansion.

Meanwhile, market players were eyeing the two deals set to price after the market close.

i3 Verticals LLC plans to price $100 million five-year exchangeable notes and Barclays Bank plc plans to price $250 million cash-settled equity linked notes tied to Visa Inc. after the market close on Wednesday.

While i3 Verticals’ new offering looked cheap, the latest synthetic offering modeled rich, sources said.

Revance expands

Revance priced an upsized $250 million of seven-year convertible notes after the market close on Wednesday at the rich end of talk with a coupon of 1.75% and an initial conversion premium of 32.5%.

Price talk had been for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%.

The greenshoe was also upsized to $37.5 million. The initial size of the deal was $200 million with a greenshoe of $30 million.

The new paper dominated activity in the secondary space and saw a large dollar-neutral expansion.

The 1.75% notes were changing hands at 103.125 early in the session with stock off slightly.

Revance stock traded to a low of $23.97 soon after the opening bell but was changing hands at $24.26, a decrease of 0.72%, shortly before 11 a.m. ET.

With $78 million in reported volume, the notes accounted for the lion’s share of the $195 million on the tape about one hour into Wednesday’s session.

i3 looks cheap

i3 Verticals plans to price $100 million five-year exchangeable notes after the market close on Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial exchange premium of 27.5% to 32.5%, according to a market source.

The notes are exchangeable for i3 Verticals Inc. common shares.

The deal was heard to be marketed with assumptions of 450 basis points over Libor and a 40% vol.

Using those assumptions, the deal modeled about 3.14 points cheap at the midpoint of talk.

However, the credit spread seemed tight given the market cap of the technology and payment processing company, which is under $1 billion, a market source said.

Barclays synthetic

In another synthetic offering, Barclays Bank plans to sell $250 million cash-settled equity linked notes tied to Visa after the market close on Wednesday with price talk for a coupon of 0%, an initial conversion premium of 20% and a reoffer price of 104 to 104.5, according to a market source.

The deal was marketed with assumptions of 55 bps over Libor and a 23% vol., a market source said.

Using those assumptions, the fair value of the deal modeled out to just north of 103, a market source said.

The deal looked rich based on the reoffer price. However, Visa is a great name, a source said. The notes will also have investment-grade ratings.

The synthetic offering is the latest in a slew that have priced since January. The deals have largely been marketed to European accounts in need of investment-grade paper due to their mandates, sources said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.