Morning Commentary: 21Vianet, Bentley Systems convertible note offerings in focus

By Abigail W. Adams

Portland, Me., Jan. 21 – After a quiet start to the week, the convertibles primary market returned to action with two deals set to price after the market close.

Bentley Systems Inc. plans to price $500 million of five-year convertible notes and 21Vianet Group Inc. plans to sell $525 million of five-year convertible notes after the market close on Thursday.

Both deals looked cheap based on underwriters’ assumptions.

However, sources had mixed opinions on the offerings.

Bentley looks cheap

Bentley Systems plans to price $500 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.125% to 0.625% and an initial conversion premium of 40% to 45%, according to a market source.

The deal was being marketed with assumptions of 275 basis points over Libor and a 38% vol., a source said.

Using those assumptions, the deal looked 2.22 points cheap at the midpoint of talk.

21Vianet eyed

21Vianet Group plans to price $525 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Underwriters were marketing the deal with assumptions of 600 bps over Libor and a 45% vol., a source said.

Using those assumptions, the deal looked 3.16 points cheap at the midpoint of talk.

While the borrow on the stock was decent, there were risks involved in the offering from the Beijing-based internet data center services provider.

The threat of China-based companies being delisted from U.S. exchanges is alive and well, a source said.

“I wouldn’t want to be on hedge on this. If it gets delisted it will be a nightmare to trade,” a source said.

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