Tyler Technologies widens talk on convertibles; AES, Cutera eyed; Airbnb notes expand

By Abigail W. Adams

Portland, Me., March 4 – The new deal frenzy in the convertible bond market continued on Thursday with the primary market slated to price $2.725 billion in three deals after the market close while $2.25 billion in two deals made their aftermarket debut.

The activity comes on another brutal day for equity markets with Federal Reserve chairman Jerome Powell’s comments during an interview with the Wall Street Journal sparking another sell-off in risk assets as the 10-year Treasury yield again broke past 1.5%.

Tyler Technologies Inc.’s planned $1.6 billion offering of convertible notes in five- and seven-year tranches widened talk in response to market conditions.

AES Corp. is on deck with $1 billion par-of-$100 three-year equity units and Cutera Inc. plans to sell $125 million in five-year convertible notes after the market close.

The deals will price, a source said. However, they will most likely come at the cheap end of talk.

Meanwhile, Airbnb Inc.’s mammoth $2 billion deal and the RealReal Inc.’s $250 million deal made their aftermarket debut as the carnage continued to mount for risk assets.

The Dow Jones industrial average closed the day down 346 points, or 1.11%, the S&P 500 closed the day down 1.34%, the Nasdaq composite ended down 2.11% and the Russell 2000 finished down 1.34%.

While several recent 0% convertible bonds continued to sell off amid the pullback in equities, Airbnb’s new 0% convertible notes due 2026 were performing well with the notes up on an outright and dollar-neutral basis.

While RealReal’s new convertible notes sank outright, they expanded dollar-neutral.

Tyler widens talk

Tyler Technologies widened talk on its planned two-tranche offering of $1.6 billion convertible notes.

The deal consists of a $1 billion tranche of five-year notes, which is now talked with a coupon of 0.25% and an initial conversion premium of 30% to 32.5%.

Initial price talk was for a fixed coupon of 0% and an initial conversion premium of 32.5% to 37.5%.

The deal also consists of a $600 million tranche of seven-year notes, which is now talked with a coupon of 1% and an initial conversion premium of 30% to 32.5%.

Initial price talk was for a coupon of 0.25% to 0.75% and an initial conversion premium of 32.5% to 37.5%.

The deal did not look very attractive with initial price talk, a source said.

AES eyed

AES plans to price $1 billion par-of-$100 three-year equity units after the market close on Thursday with price talk for a yield of 6.375% to 6.875% and a threshold appreciation premium of 22.5% to 27.5%, according to a market source.

The deal was heard to be in the market with assumptions of 125 bps over Libor and a 35% vol., with a 36.5% to 33.5% skew, according to a market source.

Using those assumptions, the deal looked 2.23 points cheap.

The deal was heard to be pricing on the cheap end of talk.

Cutera in focus

Cutera plans to price $125 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal was heard to be in the market with assumptions of 650 bps over Libor and a 40% vol.

The company’s stock was walloped on Thursday and closed the day at $26.02, a decrease of 24.93%.

However, the deal is still set to price, a source said, although it is expected to come on the cheap end of talk.

Airbnb expands

Airbnb sold $2 billion of five-year convertible notes after the market close on Wednesday at par with a coupon of 0% and an initial conversion premium of 60%.

Pricing came in line with talk for a fixed coupon of 0% and at the cheap end of talk for an initial conversion premium of 60% to 65%, according to a market source.

The new paper was performing well out of the gate.

The notes were trading in a tight range between 100.25 and 100.5 on an outright basis early in the session, a source said.

They continued to perform well even as the rest of the market tanked following Powell’s interview.

The notes were changing hands at 100.75 in the late afternoon.

They expanded 1.5 points dollar-neutral, a source said.

Airbnb’s stock traded to a high of $183.90 and a low of $170.87 before closing the day relatively unchanged at $180.23, a decrease of 0.094%.

RealReal below par

The RealReal priced $250 million of seven-year convertible notes after the market close on Wednesday at par with a coupon of 1% and an initial conversion premium of 32.5%.

Pricing came at the cheap end of talk for a coupon of 0.5% to 1% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The new paper was hurting on an outright basis. However, it expanded dollar-neutral on the move down.

The 1% convertible notes were marked at 96 bid, 97 offered in the late afternoon.

They expanded about 1 point dollar-neutral, a source said.

RealReal’s stock traded to a high of $24.10 and a low of $21.10 before closing the day at $22.24, a decrease of 7.33%.

Mentioned in this article:

AES Corp. NYSE: AES

Airbnb Inc. Nasdaq: ABNB

Cutera Inc. Nasdaq: CUTR

RealReal Inc. Nasdaq: REAL

Tyler Technologies Inc. NYSE: TYL

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