Northern Oil and Gas convertibles jump on debut; Avalara active as takeover vote nears

By Abigail W. Adams

Portland, Me., Oct. 12 – It was an active day in the convertibles secondary space on Wednesday as new paper from Northern Oil and Gas Inc. made its aftermarket debut.

Northern Oil priced an upsized $435 million of seven-year convertible notes after the market close on Tuesday.

The new paper was the name of the day with the notes making large gains on an outright and dollar-neutral basis, sources said.

It hit the secondary space on another choppy day for equities with indexes wavering between gains and losses before closing the day flat to slightly weaker.

Markets “can’t get a break,” a source said, with everyone “crushed” amid the downturn in equities.

However, demand for new paper has remained strong, which is a good sign for the market.

The Dow Jones industrial average closed down 28 points, or 0.10%, the S&P 500 index closed down 0.33%, the Nasdaq Composite index closed down 0.09% and the Russell 2000 index closed down 0.05%.

Uncertainty remained high following the release of the Federal Reserve’s September meeting minute notes and on the eve of the release of the latest Consumer Price Index report.

There was $600 million on the tape about one hour before the market close with Northern Oil accounting for nearly one fourth of the total reported volume.

Avalara Inc.’s 0.25% convertible notes due 2026 were gaining strength in active trade with the shareholder vote on its takeover days away.

Index rebalancing jumpstarted activity in some names with MongoDB Inc.’s 0.25% convertible notes due 2026 seeing heavy volume ahead of its index addition.

Northern Oil jumps on debut

Northern Oil priced an upsized $435 million of seven-year convertible notes after the market close on Tuesday at par at the midpoint of talk with a coupon of 3.625% and an initial conversion premium of 27.5%.

Price talk was for a coupon of 3.375% to 3.875% and an initial conversion premium of 25% to 30%.

The greenshoe was also upsized to $65 million.

The initial size of the offering was $350 million with a greenshoe of $50 million.

The deal played to solid demand during bookbuilding and made a strong aftermarket debut.

The 3.625% notes “jumped out of the gate,” a source said.

They traded up to 102.5 prior to the market open and were marked at 102.25 bid, 102.75 offered with stock up early in the session.

The notes continued to rise alongside stock as the session progressed with the notes trading as high as 104.

They were changing hands at 103.875 versus a stock price of $30.59 in the late afternoon.

The notes expanded about 2 points dollar-neutral, a source said.

There was $140 million in reported volume.

Northern Oil’s stock traded to a low of $29.31 before closing at the day’s high of $31.21, an increase of 4.71%.

The new paper was sought after with the offering an opportunity for accounts to increase their positions in the energy sector, a source said.

The independent energy company is a well-known name in the high-yield market, and the offering attracted some cross-over investors.

Avalara active

Avalara’s 0.25% convertible notes due 2026 were gaining strength in active trade on Wednesday with the shareholder vote on the company’s takeover just days away.

The 0.25% notes were up 0.75 point outright to 97.5 in the late afternoon.

There was $10 million in reported volume.

Avalara’s 0.25% convertible notes skyrocketed in early September after Vista Equity Partners announced its acquisition of the tax software company for $93.50 per share in an all-cash transaction.

The notes have largely traded on a 96-handle since.

The acquisition is up for shareholder approval on Oct. 14.

Avalara’s largest shareholder, Altair US, which owns about a 1% stake, has announced it is voting against the proposal, which it feels undervalues the company.

However, Avalara’s convertible notes were acting like the market is expecting the deal to go through, a source said.

The convertible notes will be taken out at par at the completion of the transaction.

MongoDB added

MongoDB’s 0.25% convertible notes due 2026 saw heavy volume on the eve of the notes’ addition to Refinitiv convertible indexes.

The 0.25% notes were slightly weaker outright with stock off early in the session.

They were changing hands at 111.5 versus a stock price of $181.16 in the late afternoon.

However, the notes were largely unchanged dollar-neutral, a source said.

There was $15 million in reported volume.

MongoDB’s stock traded to a high of $182.72 and a low of $172.40 before closing the day at $181.80, an increase of 0.97%.

The notes will be added to Refinitiv indexes on Thursday.

Mentioned in this article:

Avalara Inc. NYSE: AVLR

MongoDB Inc. Nasdaq: MDB

Northern Oil and Gas Inc. NYSE: NOG

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