Morning Commentary: Model N convertible offering eyed; Rivian flat; Liberty Media soars

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 Wednesday after $1.8 billion in two deals priced post-close on Tuesday.

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 flat open for equities.

The Dow Jones industrial average was down 58 points, or 0.17%, the S&P 500 index was up 0.15%, the Nasdaq Composite index was up 0.25% and the Russell 2000 index was up 0.35% shortly before 11 a.m. ET.

Rivian’s 4.625% notes due 2029 were holding in the aftermarket with the notes below par at the open but popping back above as the session progressed.

The notes were flat to modestly expanded dollar-neutral.

However, Liberty Media’s 3.75% convertible notes due 2028 were “winners” with the notes making large gains on an outright and dollar-neutral basis on debut.

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 holds

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.

They fell largely flat in the aftermarket.

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.

The notes may have seen a modest dollar-neutral expansion “but nothing spectacular for a giant deal,” a source said.

Rivian’s stock was changing hands at $14.94, an increase of 2.08%, shortly before 11 a.m. ET.

Liberty Media soars

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 played to strong demand during book building and soared on an outright and dollar-neutral basis on their debut.

The 3.75% notes were marked at 101.5 bid, 102 offered with stock down 2.5% early in the session.

They expanded 2.5 points dollar-neutral.

“That’s a winner,” a source said.

Liberty Media’s series A Liberty SiriusXM stock was $28.82, a decrease of 2.96%, shortly before noon ET.

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.

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