Convertibles primary picks up; NextGen jumps on debut; New Mountain flat; Twitter active

By Abigail W. Adams

Portland, Me., Oct. 28 – The convertibles primary market sprung to life on Thursday with two offerings pricing after the market close.

NextGen Healthcare Inc. priced an upsized $230 million of five-year convertible notes and New Mountain Finance Corp. sold $200 million of three-year convertible notes.

While New Mountain’s offering was directly marketed and largely tucked away, NextGen’s paper dominated the secondary space and skyrocketed on debut.

The new paper came on a strong day for equity markets with indexes brushing off more disappointing earnings results from the tech sector to surge higher and close a volatile week with gains.

The Dow Jones industrial average closed Friday up 829 points, or 2.59%, the S&P 500 index closed up 2.46%, the Nasdaq Composite index closed up 2.87% and the Russell 2000 index closed up 2.25%.

There was $370 million on the tape in the late afternoon with NextGen accounting for nearly 25% of the total reported volume.

Twitter Inc.’s convertible notes remained active as Elon Musk made good and closed his $44 billion acquisition of the company.

New Mountain flat

New Mountain priced $200 million of three-year convertible notes after the market close on Thursday at par with a coupon of 7.5% and an initial conversion premium of 14.7%.

The refinancing deal was directly marketed to investors.

New Mountain is an investment-grade company, and the chunky coupon and short-duration of the notes made the offering attractive, a source said.

However, the large coupon was to compensate for the large dividend paid on common stock and the low volatility of the company’s stock.

The new paper was flat as expected in thin volume on Friday.

The notes were wrapped around par in the late afternoon with $4 million in reported volume.

New Mountain’s stock traded to a high of $12.45 and a low of $12.07 before closing the day at $12.09, a decrease of 2.34%.

“They’re most likely tucked away,” a source said.

NextGen in demand

NextGen sold an upsized $230 million of five-year convertible notes after the market close on Thursday at par at the rich end of talk with a coupon of 3.75% and an initial conversion premium of 35%.

Price talk was for a coupon of 3.75% to 4.25% and an initial conversion premium of 30% to 35%.

The greenshoe was also upsized to $45 million.

The initial size of the offering was $200 million with a greenshoe of $30 million.

The new paper played to solid demand during bookbuilding and jumped in heavy volume on its aftermarket debut.

The 3.75% notes traded up to 103.25 on an outright basis early in the session.

They were changing hands at 103.75 versus a stock price of $19.55 in the late afternoon.

The notes expanded 2 points to 2.5 points dollar-neutral, a source said.

There was $90 million in reported volume, a surprise to some sources given the small size of the offering.

NextGen’s stock traded to a high of $19.63 and a low of $18.76 before closing the day at $19.56, an increase of 2.84%.

Twitter’s takeout

Twitter’s convertible notes once again dominated the tape as Musk completed his acquisition of the company.

The notes continued to trade up to their takeout potential.

Twitter’s 0% convertible notes due 2026 were wrapped around 99.365 in heavy volume with $25 million on the tape in the late afternoon.

The 0.25% convertible notes due 2024 traded at 112.125.

There was $21 million in reported volume.

Twitter officially became a private company on Friday as Musk closed his $44 billion acquisition and paid $54.20 a share, a premium over Thursday’s $53.70 closing price.

The notes will be taken out in the acquisition with the 0% convertible notes due 2026 redeemed at par and the 0.25% convertible notes taken out according to the make-whole matrix.

Mentioned in this article:

New Mountain Finance Corp. Nasdaq: NMFC

NextGen Healthcare Inc. Nasdaq: NXGN

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