iQIYI notes on tap; DexCom, Electronics for Imaging, Liberty Media sell $1.24 billion

By Abigail W. Adams

Portland, Me., Nov. 28 – After a lull in activity caused by deteriorating market conditions, the convertibles primary market priced $1.24 billion in new paper over three deals prior to the market open with one more joining the forward calendar after the market close.

DexCom Inc. priced $750 million five-year convertible notes, Electronics For Imaging Inc. sold an upsized $135 million of five-year convertibles and Liberty Media Corp. priced $350 million of exchangeable debentures due 2048 prior to the market open on Wednesday.

Each deal priced at the cheap end or cheaper than initial price talk, and one priced with a discount.

The new paper dominated trading activity in the secondary space and was expanding on market debut, sources said.

All eyes were on the pricing and performance of the new deals, which sources said would largely determine primary market activity through the remainder of the year.

With the new deals strong in the secondary space, one more deal joined the forward calendar.

iQIYI Inc. plans to price $500 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 40% to 45%, according to a market source.

Goldman Sachs & Co. LLC, BofA Merrill Lynch and J.P. Morgan Securities LLC are joint bookrunners for the Rule 144A and Regulation S offering, which carries a greenshoe of $75 million.

Meanwhile, Wayfair Inc.’s recently priced 1.125% convertible notes due 2024 were also active in the secondary space on Wednesday with the notes making gains on an outright and dollar-neutral basis as stock soared.

While the new issues were doing well and equity markets rebounded, the overall convertibles market remained soft, sources said.

Yields have been on the rise with many convertibles crossing a 7% yield to maturity, an indication that the bond floor is sinking under heavy market conditions, a market source said.

“The bonds aren’t holding quite as well as they would have six months ago,” a market source said.

Widening credit spreads have taken their toll on the market.

The health care sector was seen as particularly soft over the past week with many names under water, another source said.

DexCom at par

DexCom priced $750 million five-year convertible notes prior to the market open on Wednesday at the cheap end of talk with a coupon of 0.75% and an initial conversion premium of 32.5%.

Price talk had been for a coupon of 0.25% to 0.75% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The new 0.75% notes were hovering around par in active trading, a market source said.

They were trading in a range of 99.625 to 100.25 with about $23 million on the tape early in the session.

They were pushed higher by a rally in the stock later in the afternoon and were seen expanded about 0.625 point dollar-neutral, a market source said.

DexCom stock was volatile during Wednesday’s session.

Stock traded to a low of $121.67 and a high of $126.88 before closing the day at $124.70, an increase of 0.57%.

EFII trades up

Electronics For Imaging priced an upsized $135 million of five-year convertible notes prior to the market open on Wednesday at the cheap end of talk with a coupon of 2.25% and an initial conversion premium of 30%.

Price talk had been for a coupon of 1.75% to 2.25% and an initial conversion premium of 30% to 35%, according to a market source.

While the initial size of the deal was upsized from $130 million, the greenshoe was downsized to $15 million from $19.5 million.

The 2.25% notes traded as high as 102 with most trades between 100.875 and 101.5 early in the session.

The notes were expanded about 1 point dollar-neutral, a market source said.

Electronics For Imaging stock was off slightly early Wednesday but rebounded in the afternoon. Stock traded to a low of $26.96 but closed Wednesday at $28.28, an increase of 2.99%.

Liberty Media at a discount

Liberty Media priced $350 million of exchangeable debentures due 2048 prior to the market open on Wednesday with a discounted reoffer price of 99.5, a coupon of 2.25% and an initial exchange premium of 25%, according to a market source.

Pricing came wide of initial talk for a coupon of 1.25% to 1.75% and an initial exchange premium of 27.5% to 32.5%.

The notes are exchangeable into shares of Live Nation Entertainment, Inc.

The deal experienced some pushback from investors given the amount of Liberty Media paper in the convertibles space, a market source said.

The 2.25% exchangeables were the most active of the new paper to hit the secondary space.

They were trading in a range of 100.75 and 101.125 early in the session and were north of 102 in the afternoon.

They were up 1.25 points dollar-neutral from the discounted reoffer price, a market source said.

Live Nation stock was off early in Wednesday’s session but closed the day in the green.

Stock traded to a low of $52.12 but closed the day at $55.13, an increase of 3.98%.

While Liberty Media’s new paper was expanding, Live Nation’s 2.25% convertible notes due 2023 remained weak in the secondary space.

The 2.25% notes due 2023 initially expanded early in Tuesday’s session.

However, they dropped 0.5 point dollar-neutral as the new deal experienced pushback Tuesday afternoon, a market source said.

There was a top to bottom drop of 1 point dollar-neutral on Tuesday, the source said.

Wayfair expands

Wayfair’s recently priced 1.125% convertible notes due 2024 saw gains on an outright and dollar-neutral basis on Wednesday as stock popped after the online retailer reported a 58% increase in direct sales over the holiday weekend.

The 1.125% convertible notes were up more than 6 points outright. They were seen at 110.5 bid, 111 offered versus a stock price of $105.61 in the afternoon.

They were expanded about 0.625 point dollar-neutral, a market source said.

Wayfair stock closed Wednesday at $104.89, an increase of 14.51%.

Wayfair was one of the few deals to price in mid-November as equities plummeted and credit spreads blew out.

The 1.125% convertible notes have struggled since hitting the secondary market and have largely traded below par. However, the notes popped above par on Monday, according to Trace data.

Wayfair stock has been on the rise on the coattails of strong sales reported from online retailers over the Thanksgiving holiday weekend.

Mentioned in this article:

DexCom Inc. Nasdaq: DXCM

Electronics For Imaging Inc. Nasdaq: EFII

Live Nation Entertainment, Inc. NYSE: LYV

Wayfair Inc. NYSE: W

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