Cerevel Therapeutics convertibles see talk tightened; Post, Liberty Media gains continue

By Abigail W. Adams

Portland, Me., Aug. 11 – New convertible paper remained in focus on Thursday with one new offering slated to price after the market close and the recent deals to clear the primary market continuing to perform well in secondary activity.

Cerevel Therapeutics Holdings Inc. planned to price $250 million of five-year convertible notes after the market close on Thursday.

The deal played to strong demand with talk tightening during bookbuilding – a first for 2022.

The deal stands poised to cap another active week for the primary market with a flurry of activity in August following a month of no new issuance.

However, the majority of deals to come to market have been refinancing.

“The flavor of the day is the refi trade,” a source said.

While equity markets have staged a remarkable recovery over the past two weeks, potential issuers are still reluctant to issue at current stock levels.

However, demand for new paper has been strong, especially from outright accounts with new issues offering an opportunity to cut losses from a brutal year, a source said.

Post Holdings Inc.’s 2.5% convertible notes due 2027 continued to gain on both an outright and dollar-neutral basis in active trading.

Liberty Media Corp.’s 2.25% convertible notes due 2027 were volatile outright. However, the notes continued to add on swap.

Equity markets closed mixed on Thursday following a strong open with the Dow Jones industrial average closing up 27 points, or 0.08%, the S&P 500 index closing down 0.07%, the Nasdaq Composite index closing down 0.58% and the Russell 2000 index closing up 0.31%.

Trading volumes were decent with $600 million in reported volume heading into the market close.

Cerevel tightens talk

Cerevel’s $250 million of five-year convertible notes played to strong demand during bookbuilding with talk tightening to a coupon of 2.5% to 2.75% and an initial conversion premium of 32.5%.

Initial talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 750 basis points over Libor and a 45% vol., according to a market source.

However, some felt the 750 bps credit spread was aggressive.

Cerevel is a young company that went public through a SPAC two years ago, a source said.

The convertible notes offering was wall-crossed; however, the books were not quite covered at the time of launch, another source said.

However, the deal was met with strong demand during bookbuilding with investor appetite for new convertibles paper increasing, especially from outright accounts, sources said.

The convertible notes are pricing concurrently with a $250 million secondary stock offering.

The secondary offering is expected to help boost the convertible notes in secondary activity.

“Usually with a stock deal it does well,” a source said. “Stock is supported the next day.”

Post adds

Post Holdings’ 2.5% convertible notes due 2027 continued to add on an outright and dollar-neutral basis on a green day for the company’s stock.

The 2.5% convertible notes climbed 2.5 points outright.

They were changing hands at 105.375 versus a stock price of $88.66 in the late afternoon.

The notes expanded another 0.375 point to 0.5 point dollar-neutral, sources said.

There was $16 million in reported volume.

Post Holdings’ stock traded to a high of $89.48 and a low of $86.52 before closing the day at $87.79, an increase of 2.31%.

The 2.5% notes skyrocketed dollar-neutral on debut with the notes closing Thursday up 5.25 points dollar-neutral.

While stock remains below the level the convertible notes priced off, they have made strong outright gains as well.

Liberty Media volatile

Liberty Media’s 2.25% convertible notes due 2027 were volatile on an outright basis alongside stock and broader markets.

However, the notes continued to add on swap.

The 2.25% notes gained 0.75 point outright early in the session.

They were changing hands at 105.625 versus a stock price of $69.81 early in the session.

However, the notes turned negative on an outright basis alongside stock.

The notes were down 0.75 point outright in the late afternoon.

They were seen at 104.125 versus a stock price of $68.19 in the late afternoon.

While down outright, the notes were up about 0.125 to 0.25 point dollar-neutral, a source said.

There was $14 million in reported volume.

Liberty’s series C Liberty Formula One stock traded to a high of $70.51 and a low of $67.77 before closing the day at $68.12, a decrease of 1.97%.

Mentioned in this article:

Cerevel Therapeutics Holdings Inc. Nasdaq: CERE

Liberty Media Corp. Nasdaq: FWONK

Post Holdings Inc. NYSE: POST

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