SVB on tap; Model N eyed; Rivian, Liberty Media volatile outright, expand dollar-neutral

By Abigail W. Adams

Portland, Me., March 8 – The convertibles primary market delivered the active week sources expected with one deal set to price after the market close on Thursday, one set to price post-close Wednesday after $1.8 billion in two deals cleared the market on Tuesday.

In the first mandatory offering of the year, SVB Financial Group plans to price $500 million $50-par three-year depositary shares representing a 1/20th interest in the company’s $1,000-par series F mandatory convertible preferred stock after the market close on Thursday.

Price talk is for a dividend of 6% to 6.5% and a threshold appreciation premium of 20% to 25%, according to a market source.

Goldman Sachs & Co. LLC and SVB Securities are bookrunners for the registered offering, which carries a greenshoe of $75 million.

Model N Inc. is on deck with a $220 million offering of five-year convertible notes.

The deal looked cheap based on underwriters’ assumptions and was expected to play to strong demand with the offering a refinancing.

Meanwhile, new paper from Rivian Automotive Inc. and Liberty Media Corp. hit the secondary space on a largely flat day for equities.

Equity indexes closed mixed with gains and losses nominal after the heavy selling of the previous session.

Federal Reserve chair Jerome Powell’s second day of congressional testimony did little to move the needle after his hawkish comments about rate increases on Tuesday rattled markets.

The Dow Jones industrial average closed Wednesday down 58 points, or 0.18%, the S&P 500 index closed up 0.14%, the Nasdaq Composite index closed up 0.40% and the Russell 2000 index closed the day up 0.04%.

There was $738 million in reported volume about one hour before the market close with new paper accounting for almost half of the activity in the space.

Rivian’s 4.625% notes due 2029 were volatile on debut with the notes trading below par early in the session but closing the day with strong outright and dollar-neutral gains.

Liberty Media’s 3.75% convertible notes due 2028 were also volatile outright with the notes making large gains early in the session but returning to par in the late afternoon.

While the notes came in as the session progressed, they held onto a large dollar-neutral expansion at the close.

Model N eyed

Model N plans to price $220 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.875% to 2.375% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 400 basis points over SOFR and a 38% vol.

Using those assumptions, the deal looked 1.38 points cheap at the midpoint of talk.

The deal is coming as a refinancing with proceeds to be used to repurchase a portion of its 2.625% notes due 2025 in privately negotiated transactions.

The borrow on stock was expected to be good and demand for the offering strong with holders switching out of the old issue for the new.

The 2.625% notes traded at 120 on Tuesday, a source said.

Rivian volatile

Rivian priced $1.3 billion of six-year green convertible notes after the market close on Tuesday at par at the cheap end of talk with a coupon of 4.625% and an initial conversion premium of 37.5%.

Price talk was for a coupon of 4.125% to 4.625% and an initial conversion premium of 37.5% to 42.5%.

The deal played to tepid demand during book building with some wary of the EV startup.

“They’re no Tesla,” a source said.

The notes were volatile in the aftermarket with a heavy start giving way to strong gains.

The notes traded heavily below par out of the gate but returned to a par handle as stock recovered.

They were trading in the 100.25 to 100.5 context about one hour into the session.

They continued their upward momentum as stock surged into positive territory in intraday activity.

The notes were changing hands at 102 versus a stock price of $14.96 in the late afternoon.

While the notes were flat to nominally expanded early in the session, they closed up about 1 point dollar-neutral.

Rivian’s stock traded to a low of $14.21 and a high of $15.23 before closing at $15.13, up 3.35%.

Liberty Media expands

Liberty Media priced $500 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 3.75% and an initial conversion premium of 30%, according to a market source.

Pricing came at the midpoint of talk for a coupon of 3.5% to 4% and in line with talk for a fixed initial conversion premium of 30%.

The deal saw demand during book building and soared on an outright and dollar-neutral basis out of the gate.

The 3.75% notes were marked at 101.5 bid, 102 offered early in the session.

They expanded about 2.5 points dollar-neutral.

However, the notes gave back some gains as the session progressed.

They were changing hands at 100.25 versus a stock price of $28.83 in the late afternoon.

While the notes gave back some of their dollar-neutral gains, they closed the day with a large dollar-neutral expansion.

Liberty Media’s series A Liberty SiriusXM stock traded to a high of $29.80 and a low of $28.72 before closing at $29.19, a decrease of 1.72%.

The offering came as a refinancing with proceeds to be used to cover a portion of the repurchase of Liberty’s 1.375% cash convertible notes due 2023 and 2.125% exchangeable senior debentures due 2048.

Liberty repurchased $703 million in principal of the notes for $774 million.

The 1.375% convertible notes and 2.125% exchangeable debentures were active due to the repurchases.

The 1.375% convertible notes appeared to be repurchased for 111.883, a source said.

The 2.125% debentures were changing hands at 96.75 in the late afternoon.

Mentioned in this article:

Liberty Media Corp. Nasdaq: LSXMA

Model N Inc. NYSE: MODN

Rivian Automotive Inc. Nasdaq: RIVN

SVB Financial Group Nasdaq: SIVB

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