Post Holdings convertibles on tap; Liberty Media eyed; Avaya plummets; Unity Software up

By Abigail W. Adams

Portland, Me., Aug. 9 – The convertibles primary market returned to action on Tuesday with two new offerings slated to price after the market close on Tuesday.

In a deal slated to price shortly after it was announced, Post Holdings Inc. plans to price $400 million of five-year convertible notes with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

Barclays (lead left), J.P. Morgan Securities LLC and Citigroup Global Markets Inc. are bookrunners for the Rule 144A offering, which carries a greenshoe of $60 million.

Liberty Media Corp. plans to sell $375 million of five-year convertible notes in the latest refinancing deal to hit the market.

While the offering looked cheap based on underwriters’ assumptions, it was mostly spoke for by holders of the notes that will be repurchased.

Meanwhile, sellers reappeared in a convertibles secondary space that had been better to buy for the past several sessions with equity indexes in the red on the eve of the release of July’s Consumer Price Index report.

However, buyers remained in the market with a good two-way flow during Tuesday’s session, a source said.

The Dow Jones industrial average closed Tuesday down 58 points, or 0.18%, the S&P 500 index closed down 0.42%, the Nasdaq Composite index closed down 1.19% and the Russell 2000 index closed down 1.46%.

There was $532 million on the tape about one hour before the market close with earnings and topical news driving activity in the space.

Trouble continued to mount for Avaya Holdings Corp. following the release of additional preliminary financial results, with the company issuing a going-concern warning about its future viability.

While volume was light, Avaya’s soon-to-mature 2.25% convertible notes due June 15, 2023 sank more than 20 points outright with the yield cracking 300%.

Unity Software Inc.’s 0% convertible notes due 2026 were active with the notes nominally improved outright following an unsolicited acquisition bid.

Liberty Media eyed

Liberty Media plans to price a $375 million offering of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%.

The notes will be convertible into Liberty’s series C Liberty Formula One common stock and will be attributed to the Liberty Formula One tracking group.

The deal was heard to be in the market with assumptions of 350 basis points over Libor and a 30% vol., a source said.

The deal looked cheap at the midpoint of talk.

However, the refinancing deal will largely be placed with holders of the notes the company plans to repurchase, a source said.

While the refinancing will help with demand, the market is already saturated with Liberty paper.

“It’s more Malone,” another source said.

Proceeds from Liberty Media’s new offering will be used to repurchase Liberty’s 1% cash convertible notes due 2023 in privately negotiated transactions.

The 1% cash convertible notes had $240 million outstanding as of June 30. They were changing hands on a 178-handle early in Tuesday’s session.

The notes traded just shy of 180 heading into the market close.

Avaya trouble

Trouble continued to mount for Avaya Holdings following the release of additional preliminary financial results with the company issuing a going-concern warning just a few weeks after completing several refinancing transactions.

Avaya’s soon-to-mature 2.25% convertible notes due June 15, 2023 sank 25 points outright.

The notes changed hands at 25 early in Tuesday’s session.

They continued to plummet as the session progressed and were seen at 19.5 in the late afternoon with the yield cracking 333%.

The technology company announced that there is substantial doubt about its ability to continue and that it had hired advisers to “assess its options to address the 2023 convertible notes,” according to a press release.

Avaya recently repurchased $129 million of the 2.25% convertible notes through a series of capital raises that included $350 million in new senior secured term loans and privately placed $250 million in 8% exchangeable notes due 2027.

The 8% convertible notes traded as high as 102.5 on July 20, shortly after Avaya completed its refinancing transactions.

However, they sank to 92 by July 28. There were no prints in the notes on Tuesday.

While the 8% convertible notes are secured, the company has a significant load of higher-ranking debt.

“So good luck” recouping losses, a source said.

The 2.25% convertible notes skyrocketed in July from a previous all-time low of 77 to as high as 95 on the refinancing transactions.

However, they plummeted to the low 50s in late June after the company released preliminary earnings with downwardly revised forecasts that reignited bankruptcy concerns.

Investors of the first-lien term loan have hired law firm Akin Gump Strauss Hauer & Feld regarding the debt sale.

Unity gains

Unity Software’s 0% convertible notes due 2026 were in focus on Tuesday with the notes nominally improved on an outright basis following an unsolicited takeover bid.

The 0% notes gained about 1 point outright to trade on a 78-handle.

They were changing hands at 78.125 versus a stock price of $49.68 in the late afternoon.

The yield was 5.87%.

Unity’s stock was volatile on the news and jumped about 7% at the open before giving back much of its gains.

Stock traded to a high of $53.27 and a low of $48.89 before closing the day at $50.35, an increase of 1.21%.

News broke on Tuesday that AppLovin, an app marketing service, had made an unsolicited takeover bid for Unity via an all-stock transaction.

Unity shareholders would receive 1.152 shares of AppLovin class A shares and 0.314 of AppLovin’s class C shares for each share, which would value Unity at $58.85 per share for a total enterprise value of $20 billion.

The offer came on the eve of Unity’s earnings report, which were released post-close Tuesday.

Unity reported losses per share of 18 cents versus analyst expectations for losses of 21 cents.

Revenue was $297 million versus analyst expectations for revenue of $299.7 million.

Mentioned in this article:

Avaya Holdings Corp. NYSE: AVYA

Liberty Media Corp. Nasdaq: FWONK

Post Holdings Inc. NYSE: POST

Unity Software Inc. NYSE: U

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