Cheesecake Factory convertible notes in focus, trade up on debut; Coupa rebounds

By Abigail W. Adams

Portland, Me., June 11 – New paper continued to dominate activity in the convertibles secondary space on Friday with the last new deal of the week making its aftermarket debut.

The Cheesecake Factory Inc. sold $300 million of five-year convertible notes after the market close on Thursday.

The new paper accounted for almost one-fourth of the total reported volume during Friday’s session and was performing well on an outright and dollar-neutral basis.

Cheesecake Factory’s deal brought the weekly tally for new paper to $2.7 billion, which priced over four deals.

Sources expect to see a flurry of activity from the primary market before the end of June. However, the pace of new deal activity is expected to remain subdued.

Outside of the new paper from Cheesecake Factory, the secondary space was quiet with few names seeing concentrated trading activity as equity benchmarks closed a largely sideways week flat.

Coupa Software Inc.’s 0.375% convertible notes due 2026 were active with the notes gaining on an outright basis as stock rebounded from a post-earnings sell-off earlier in the week.

Scorpio Tankers Inc.’s 3% convertible notes due 2022 also saw renewed attention in the secondary space with the notes popping above par.

Cheesecake Factory eyed

The Cheesecake Factory sold $300 million of five-year convertible notes after the market close on Thursday at par with a coupon of 0.375% and an initial conversion premium of 40%.

In a throwback to the heyday of primary market activity, demand for the notes drove pricing tighter than initial talk.

The notes were initially talked with a coupon of 0.5% to 1% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Concurrently, the company priced a secondary offering of $175 million, or 3,125,000 shares, of common stock at $56.00. The secondary offering carries a greenshoe of $26.25 million.

The new paper dominated activity of the secondary space, accounting for nearly ¼ of the total reported volume during Friday’s session.

There was more than $100 million on the tape by the late afternoon with total reported volume $433 million.

The notes opened the day at par and steadily climbed as the session progressed.

The 0.375% notes were changing hands at 103 on an outright basis a little more than one hour after the opening bell.

The notes continued to trade around 103 heading into the late afternoon.

They expanded upwards of 2 points based off of the closing price of stock on Thursday. However, they expended upward of 2.75 points dollar-neutral based off of the price of the concurrent secondary offering.

Cheesecake Factory’s stock traded to a high of $58.10 and a low of $55.99 before closing the day at $56.08, a decrease of 1.37%.

Coupa improves

Coupa’s 0.375% convertible notes due 2026 were posting gains on an outright basis as stock rebounded and nearly erased losses from an earnings-induced sell-off earlier in the week.

The 0.375% notes gained 3 points outright with stock up 4%

The notes were changing hands at 108.75 versus a stock price of $229.49 in the late afternoon.

There was $11 million in reported volume.

Coupa’s stock traded to a low of $222.53 and a high of $234.66 before closing the day at $234.26, an increase of 4.83%.

Stock rebounded after a steep sell-off following first-quarter earnings earlier in the week, which drove stock down more than 8%.

While the technology platform for business spend management beat expectations on both the top and bottom lines in its earnings report, stock tanked on Tuesday following the announcement.

The convertible notes dropped about 4 points outright to a 105-handle on Wednesday and Thursday.

Scorpio active

Scorpio Tankers’ 3% convertible notes due 2022, an off-the-run name that rarely makes it into the top 10 on Trace, were active on Friday.

However, the notes were largely unchanged. They were changing hands just north of par in the high-volume activity.

There was about $9 million in reported volume.

Scorpio Tankers’ stock traded to a high of $22.88 and a low of $22.13 before closing the day at $22.18, a decrease of 0.81%.

Mentioned in this article:

Cheesecake Factory Inc. Nasdaq: CAKE

Coupa Software Inc. Nasdaq: COUP

Scorpio Tankers Inc. NYSE: STNG

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