Morning Commentary: BridgeBio, Sunrun convertible notes in focus, trade up on debut

By Abigail W. Adams

Portland, Me., Jan. 26 – The convertibles secondary market saw $1 billion in new paper enter the space on Tuesday.

BridgeBio Pharma Inc. priced an upsized $650 million of eight-year convertible notes and Sunrun Inc. priced $350 million of five-year convertible notes after the market close on Monday.

The deals were in demand during bookbuilding and in the secondary space where they both were trading up on an outright and dollar-neutral basis.

BridgeBio in demand

BridgeBio priced an upsized $650 million of eight-year convertible notes after the market close on Monday at par with a coupon of 2.25% and an initial conversion premium of 47.5%.

Pricing came in line with tightened talk for a fixed coupon of 2.25% and at the rich end of tightened talk for an initial conversion premium of 42.5% to 47.5%.

Initial price talk was for a coupon of 2.25% to 2.75% and an initial conversion premium of 32.5% to 37.5%.

The deal was met with heavy demand during bookbuilding and was as much as 4x oversubscribed, a source said.

The demand followed the notes into the secondary space.

The notes traded as high as 103.5 early in the session but drifted down alongside stock and were changing hands between 101.5 and 102 about one hour after the opening bell.

The convertibles expanded 3 to 4 points on a dollar-neutral, or hedged, basis, a source said.

BridgeBio’s stock was changing hands at $63.69, an increase of 3.13%, shortly before 11 a.m. ET.

Sunrun’s run

Sunrun priced $350 million of five-year convertible notes after the market close on Monday at par with a coupon of 0% and an initial conversion premium of 50%, according to a company news release.

Pricing came at the rich end of initial price talk for a coupon of 0% to 0.5% and richer than initial talk for an initial conversion premium of 42.5% to 47.5%.

The notes skyrocketed on debut.

They traded as high as 106 on an outright basis with stock up a little more than 3%.

The notes expanded at least 4 points dollar-neutral, a source said.

While the notes were putting in a strong performance in the aftermarket, they modeled fair value to rich at the midpoint of initial talk, a source said.

“It’s a frenzy,” a source said. “People are buying the story, not the model.”

Sunrun’s stock was changing hands at $80.72, an increase of 2.54%, shortly before 11 a.m. ET.

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