Morning Commentary: Planned BridgeBio Pharma, SunRun convertible offerings eyed

By Abigail W. Adams

Portland, Me., Jan. 25 – The convertibles primary market leapt to action on Monday with two overnight offerings on deck.

BridgeBio Pharma Inc. plans to price $400 million of eight-year convertible notes and Sunrun Inc. plans to sell $350 million of five-year convertible notes after the market close on Monday.

While the BridgeBio notes looked cheap based on underwriters’ assumptions, sources saw Sunrun’s convertible offering modeling rich.

BridgeBio looks cheap

BridgeBio plans to price $400 million of eight-year convertible notes with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The deal was heard to be in the market with assumptions of 500 basis points over Libor and a 40% vol.

Using those assumptions, the deal looked 6.35 points cheap at the midpoint of talk, a source said.

However, the short interest in the name is high at 14.2%, which may create issues with the borrow, a source said.

Sunrun on tap

Sunrun plans to price $350 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 42.5% to 47.5%, according to a market source.

While it is unclear what underwriters were using, assuming a credit spread of 500 bps over Libor and a 45% vol., the deal looked about 2 points rich at the midpoint of talk, a source said.

However, assuming a credit spread of 375 bps over Libor, the deal looked 0.75 point cheap, a source said.

The solar panel company has straight debt that priced with a spread of 325 bps over Libor and trades with a spread of 350 bps over Libor, a source said.

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