MakeMyTrip, Pebblebrook add-on on tap; Mitek skyrockets on debut; U.S. Steel in focus

By Abigail W. Adams

Portland, Me., Feb. 3 – The convertibles primary market added to the forward calendar on Wednesday with one new offering and one add-on launching after the market close.

MakeMyTrip Ltd. plans to price $175 million of seven-year convertible notes and Pebblebrook Hotel Trust plans to price a $175 million add-on to its 1.75% convertible notes due 2026 after the market close on Thursday.

Meanwhile, there was an uptick of activity in the secondary space as the first new paper of the week made its aftermarket debut.

There was $94 million on the tape about one hour after the opening bell and about $700 million in reported volume heading into the market close.

Mitek Systems Inc.’s newly priced convertible notes were in demand during bookbuilding and in the secondary space with the notes skyrocketing on an outright and dollar-neutral, or hedged, basis.

U.S. Steel Corp.’s 5% senior notes due 2026 were in focus with the notes expanding as stock sank on the heels of a secondary offering.

Jazz Pharmaceuticals plc’s 2% exchangeable notes due 2026 saw renewed attention in the secondary space with the notes expanding as stock traded off following an acquisition.

DISH Network Corp.’s convertible notes were also active with a large seller of the company’s 3.375% convertible notes due 2026 the previous session and active buying of the company’s 0% convertible notes due 2025 on Wednesday.

The calendar

While some sources were surprised the convertibles primary market was not more active over the course of the week, two new deals are in the works.

MakeMyTrip plans to price $175 million of seven-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 30% to 35%, according to a market source.

Morgan Stanley & Co. LLC is the lead left bookrunner for the Rule 144A offering, which carries a greenshoe of $25 million.

Pebblebrook Hotel returned to the primary market with plans price a $175 million add-on to its 1.75% convertible notes due 2026 after the market close on Thursday with price talk for a reoffer price of 104.5 to 105, according to a market source.

BofA Securities Inc. and Raymond James & Associates are bookrunners for the registered offering, which carries a greenshoe of $25 million.

The notes will carry the same terms and form a single series with the company’s 1.75% convertible notes due 2026.

Mitek in demand

Mitek Systems sold an upsized $135 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 0.75% and an initial conversion premium of 37.5%.

The notes were in demand during bookbuilding and priced at the rich end of initial price talk for a coupon of 0.75% to 1.25% and richer than initial talk for a conversion premium of 30% to 35%, according to a market source.

The greenshoe was also upsized to $20.25 million.

The initial size of the offering was $125 million with a greenshoe of $18.75 million.

The new paper skyrocketed in the secondary space.

They traded north of 105 in intraday activity with the majority of trades between 103.5 and 104.5, a market source said.

The notes expanded 2.75 points to 3.5 points dollar-neutral.

The pricing and the trading level of the notes was an indication of the pent-up demand for new paper in the convertibles universe, a source said.

Mitek’s stock traded to a high of $15.73 and a low of $15.01 before closing the day largely flat at $15.15, a decrease of 0.066%.

U.S. Steel in focus

U.S. Steel’s 5% senior notes due 2026 were in focus on Wednesday with the notes expanding as stock traded off on the heels of a secondary offering.

The notes dropped about 10 points outright with stock off almost 8%.

They were changing hands at 155 early in the session and were trading at 154.25 versus a stock price of $16.36 in the late afternoon.

They expanded about 2.5 points dollar-neutral, a source said.

The notes were among the most active of Wednesday’s session with $18.5 million in reported volume.

The notes have been on a run since the start of the year and have gained about 5 points dollar-neutral since January.

“They’ve been a big winner for people,” a source said.

U.S. Steel’s stock traded to a high of $16.70 and a low of $16.13 before closing the day at $16.26, a decrease of 7.82%.

Stock dropped after the company announced a secondary offering of 42 million shares.

Jazz’s acquisition

Jazz’s 2% exchangeable notes due 2026 saw some action on Wednesday with the notes expanding as stock traded off following news of an acquisition.

The 2% notes were changing hands at 126.625 versus a stock price of $154.15 in the late afternoon, according to a market source.

They expanded about 0.5 point dollar-neutral.

Jazz’s stock traded to a high of $166.89 and a low of $146.01 before closing the day at $151.21, a decrease of 3.87%.

Stock traded off after the pharmaceutical company announced it was purchasing GW Pharmaceuticals, a cannabis-based drug-maker, for $6.7 billion in cash and stock.

“Stock got hit on the acquisition, which isn’t surprising,” a source said. “They’ll have to add more debt to their balance sheet.”

DISH active

DISH’s convertible notes saw some unusual activity over the past two sessions with a large seller of the company’s 3.375% convertible notes due 2026 on Tuesday and active buying of the company’s 0% convertible notes due 2025 on Wednesday.

The 3.375% notes saw about $80 million in estimated volume late Tuesday afternoon.

The notes were sold at 92.831. They contracted about 0.5 point in the activity.

The 3.375% notes were largely unchanged on Wednesday.

However, DISH’s 0% convertible notes due 2025 were active.

While below par, the notes were improved dollar-neutral.

They were changing hands at 97.75 versus a stock price of $30.81, according to market source.

There was about $10 million in reported volume.

The 0% notes pushed out about 0.5 point dollar-neutral, a source said.

DISH’s stock traded to a high of $30.89 and a low of $29.86 before closing the day at $30.73, an increase of 2.19%.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

Jazz Pharmaceuticals plc Nasdaq: JAZZ

MakeMyTrip Ltd. Nasdaq: MMYT

Mitek Systems Inc. Nasdaq: MITK

Pebblebrook Hotel Trust NYSE: PEB

U.S. Steel Corp. NYSE: X

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