BridgeBio upsizes convertibles, tightens talk; Sunrun eyed; 21Vianet, Bentley soar

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 an upsized $650 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.

BridgeBio’s offering played to heavy demand during bookbuilding with the deal upsizing and talk tightening.

Sunrun’s convertible notes offering looked slightly cheap based on underwriters’ assumptions. However, some sources found the deal to be rich.

Meanwhile, it was a quiet day in the secondary space as equity markets seesawed between gains and losses.

Bentley Systems Inc.’s 0.125% convertible notes due 2026 and 21Vianet Group Inc.’s 0% convertible notes due 2026 remained active with both issues continuing to soar on an outright and dollar-neutral basis.

While volume was light, DocuSign Inc.’s 0% convertible notes due 2024 were holding onto their outright gains and expanded dollar-neutral as stock sold off during Monday’s session.

BridgeBio in demand

BridgeBio’s offering of eight-year convertible notes was in demand during bookbuilding with the deal upsizing and price talk tightening.

The deal upsized to $650 million, from $400 million, and talk tightened to a fixed coupon of 2.25% and an initial conversion premium of 42.5% to 47.5%, a source said.

Initial price talk was 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 as much as 4x oversubscribed.

The deal was marketed 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 initial talk, a source said.

The short interest in the name is high at 14.2%, a source said.

While other sources did not feel there was an issue with the borrow, despite the large amount of short-interest, sources pointed to the eight-year duration as a drawback to the offering.

“That’s why it’s so cheap,” a source said.

The eight-year duration is unusual for convertible notes.

However, longer durations on convertible notes may become a trend in 2021 as part of the increasingly aggressive pricing of convertible notes.

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.

Underwriters were marketing the deal with assumptions of 400 bps over Libor and a 45% vol., which looked 0.75 point cheap at the midpoint of talk.

However, using a wider 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.

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.

The short interest in the name is also high at 11%, another source said.

Day 2

Last week’s deals, which made their aftermarket debut last Friday, continued to soar their second day in the secondary space.

Both Bentley Systems’ 0.125% convertible notes due 2026 and 21Vianet Group’s 0% convertible notes due 2026 were up about 5 points dollar-neutral, a source said.

Bentley Systems’ 0.125% notes traded north of 106 early in the session.

The majority of prints were between 103 to 104.5 with stock off 2% to 3%.

The 0.125% notes expanded 5 to 6 points dollar-neutral, a source said.

Bentley Systems’ stock traded to a high of $47.08 and a low of $41.85 before closing the day at $43.07, a decrease of 6.06%.

21Vianet’s 0% convertible notes due 2026 were also doing “extremely well,” a source said.

The notes were up about 7 points outright with stock up about 2%.

They were changing hands at 107.5 in the late afternoon.

The notes expanded 5 points dollar-neutral, a source said.

21Vianet’s stock traded to a high of $43.80 and a low of $41.04 before closing the day at $41.42, an increase of 1.34%.

DocuSign holds

While volume was light, DocuSign’s 0% convertible notes due 2024 were holding onto their outright gains and expanded dollar-neutral as stock sold off during Monday’s session.

The 0% convertible notes were little changed on an outright basis even as stock dropped upwards of 6% in intraday activity.

“They’re holding up like crazy,” a source said.

The notes continued to trade around 107.

They expanded about 0.5 point dollar-neutral.

The notes trade on a small delta due to their short duration, a source said.

DocuSign’s stock traded to a high of $260.00 and a low of $236.68 before closing the day at $244.40, a decrease of 4.21%.

Stock sold off after DocuSign appeared on a list prepared by Goldman Sachs’ analysts of stocks that were especially frothy.

Mentioned in this article:

21Vianet Group Inc. Nasdaq: VNET

Bentley Systems Inc. Nasdaq: BSY

BridgeBio Pharma Inc. Nasdaq: BBIO

DocuSign Inc. Nasdaq: DOCU

Sunrun Inc. Nasdaq: RUN

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