Supernus convertibles price rich, expand on debut; Zendesk, Live Nation deals on tap

By Abigail W. Adams

Portland, Me., March 15 – The convertibles primary market has been bringing forward new deals “fast and furious,” a market source said, with a $350 million deal pricing prior to the market open on Thursday and $1 billion in new deals expected to price after the market close.

Supernus Pharmaceuticals, Inc. priced $350 million of five-year convertible notes prior to the market open on Thursday with a coupon of 0.625% and an initial conversion premium of 37.5%.

The new paper “did stellar, as expected,” a market source said, expanding 3 points dollar neutral on debut.

Zendesk, Inc. plans to price $500 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 25% to 30%, according to a market source.

Zendesk is the type of name outright accounts love, a market source said. “The kicker is going to be the volatility,” the source said.

Live Nation Entertainment, Inc. plans to price $500 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 47.5% to 52.5%, according to a market source.

“I’m hearing good things,” a market source said. Live Nation is a well-known name in the convertibles space and the deal is expected to do well.

Helix Energy Solutions Group Inc.’s new 4.125% notes due 2023 were not as active their second day on the market with only about $4 million in trades on Thursday.

However, the notes continued to perform well and were seen trading around 103.5 points.

While a total of $1.475 billion in new paper is expected to price this week “the market still isn’t full yet,” a market source said.

There has not been a lot of selling to make room for new paper. “A couple more billion dollar deals and things will start to trade off,” the source said.

Supernus expands

Supernus’ new 0.625% notes were highly sought after during the subscription process and expanded on their market debut.

Pricing came richer than price talk for a coupon of 0.75% to 1.25% and at the rich end of talk for an initial conversion premium of 32.5% to 37.5%, according to a market source.

“There was a ton of demand,” a market source said.

The 0.625% notes expanded 3 points on a dollar-neutral basis on their secondary market debut, the source said. They were seen at 103.75 bid, 104.25 offered with the stock at $43.90 early in the session.

The 0.625% notes maintained their 3-point dollar-neutral expansion late into the afternoon. Supernus stock closed Thursday at $43.175, an increase of 0.06%.

In connection with the offering, the Rockville, Md.-based specialty pharmaceutical company entered into convertible note hedge and warrant transactions with a strike price of $80.91, representing a premium of 87.5% from the company’s perspective, according to a company news release.

Zendesk on tap

Zendesk plans to price $500 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 25% to 30%, according to a market source.

The deal is being marketed with a credit spread of 250 bps over Libor and a 38% vol., a market source said. “It looks OK,” a market source said. “Fair value is what you’re getting now.”

However, the 38% vol. seems to be a little high with sources pegging it more at 35%. The San Francisco-based customer service software company is the type of name “fundamental buyers love,” the source said.

It is also a large liquid deal, which buyers like. “The kicker is going to be the volatility,” the source said.

Live Nation looks good

Live Nation’s planned offering of $500 million of five-year convertible notes is highly anticipated and expected to do well. “I’m hearing good things,” a market source said.

Live Nation plans to price after the market close on Thursday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 47.5% to 52.5%, according to a market source.

The convertible notes are being offered concurrently with a $300 million offering of senior notes due 2026 with initial talk for a coupon in the 5.75% area, Prospect News reported.

“They have a lot of money and now they’re raising more,” a market source said.

The deal is expected to do well. Live Nation is a “repeat offender” and a well-known name in the convertibles space.

Proceeds from the offerings will be used to repurchase the company’s 2.5% convertible notes due 2019 from time to time and for general corporate purposes, according to a company news release.

Live Nation’s 2.5% convertible notes due 2019 were seen trading in a range of 132 to 134 on Thursday.

The Los Angeles-based entertainment events promoter and venue operator’s stock was up on Thursday, closing the day at $45.37, an increase of 1.25%.

Mentioned in this article:

Live Nation Entertainment, Inc. NYSE: LYV

Helix Energy Solutions Group Inc. NYSE: HLX

Supernus Pharmaceuticals, Inc. Nasdaq: SUPN

Zendesk, Inc. NYSE: ZEN

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