Floodgates open; Super Micro, Lyft, Sunrun, Parsons on tap; Global Payments jumps

By Abigail W. Adams

Portland, Me., Feb. 21 – The convertibles primary market opened the floodgates on Wednesday after pricing the largest deal thus far in 2024 with four deals totaling $3.07 billion on deck.

In a deal set to price shortly after it was announced, Parsons Corp. plans to price $700 million of five-year convertible notes after the market close on Wednesday.

Sunrun Inc., Super Micro Computer Inc. and Lyft Inc. are also in the market with deals set to price post-close Thursday.

The onslaught comes after Global Payments Inc. priced $1.75 billion of seven-year convertible notes (Baa3/BBB-/BBB) after the market close on Tuesday.

The new paper hit the secondary space on a mixed day for markets with equity indexes in the red at the open but paring losses and turning mixed by the close.

The Dow Jones industrial average closed Wednesday up 48 points, or 0.13%, the S&P 500 index closed up 0.13%, the Nasdaq Composite index closed down 0.32% and the Russell 2000 index closed down 0.54%.

However, Global Payments’ new convertible notes made large gains on an outright and dollar-neutral basis with the notes accounting for almost 50% of the $729 million in reported volume in the late afternoon.

Outside of new paper, earnings continued to spark large movements in the space with the cybersecurity sector taking a hit on Palo Alto Networks Inc.’s results.

Palo Alto’s deep-in-the-money 0.375% convertible notes due June 1, 2025 sank outright but improved on hedge as stock dropped almost 30%.

Zscaler Inc.’s 0.125% convertible notes due 2025 were also down outright but made large gains on hedge as stock took a hit in sympathy.

NuVasive, Inc.’s (Globus Medical, Inc.) 0.375% convertible notes due 2025 were active although largely unchanged after the company mentioned a potential capital raise to address its upcoming maturity in its earnings report.

New paper

In an overnight offering, Parsons plans to price $700 million of five-year convertible notes after the market close on Wednesday with price talk for a fixed coupon of 2.625% and a fixed conversion premium of 25%, according to a market source.

BofA Securities Inc. (lead left), Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $100 million.

Super Micro Computer plans to price $1.5 billion 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 35% to 40%, according to a market source.

Goldman Sachs, BofA Securities, JPMorgan and BMO Capital Markets Corp. are bookrunners for the Rule 144A offering, which carries a greenshoe of $225 million.

Lyft plans to sell $400 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.625% to 1.125% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

BofA Securities, Goldman Sachs, JPMorgan, BMO Capital Markets, KeyBanc Capital Markets Inc., RBC Capital Markets LLC and TD Securities (USA) LLC are bookrunners for the Rule 144A deal, which carries a greenshoe of $60 million.

Sunrun plans to bring $475 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Goldman Sachs (lead left) and Morgan Stanley & Co. LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $75 million.

Global Payments jumps

Global Payments priced $1.75 billion of seven-year convertible notes (Baa3/BBB-/BBB) after the market close on Tuesday at par with a coupon of 1.5% and an initial conversion premium of 20%.

Pricing came at the rich end of talk for a coupon of 1.5% to 2% and at the midpoint of talk for an initial conversion premium of 17.5% to 22.5%, according to a market source.

The new paper played to strong demand from both outright and hedge accounts with the offering heavily oversubscribed.

The new 1.5% notes jumped on an outright and dollar-neutral basis on their aftermarket debut.

The notes hit a 103-handle out of the gate and were trading in the 103 to 103.5 context early in the session.

They came in slightly on an outright basis and were wrapped around 102.5 in the late afternoon.

The notes expanded about 3 points dollar-neutral, a source said.

There was more than $300 million in reported volume.

Global Payments’ stock traded to a high of $133.49 and a low of $130.90 before closing at $132.46, an increase of 1.27%.

Cybersecurity crushed

The cybersecurity sector was taking a beating on Wednesday as Palo Alto’s weak guidance sparked heavy selling in the sector.

Palo Alto’s 0.375% convertible notes due June 1, 2025 tanked outright alongside stock but improved dollar-neutral.

The deep-in-the-money notes dropped more than 105 points outright with stock off almost 30%.

The convertibles were trading at 272.875 early in the session and sank to 261.875 in the late afternoon.

The notes gained about 0.5 point on hedge on the move down early, a source said.

Palo Alto’s stock traded between $275.98 and $260.09 before closing at $261.97, down 28.44%.

Palo Alto reported an earnings beat with earnings per share of $1.46 versus analyst expectations for earnings of $1.30.

Revenue was $1.98 billion versus the $1.97 billion expected.

However, stock plunged after the company lowered its revenue guidance.

The company’s weak outlook shook the cybersecurity sector with stocks across the industry getting hammered.

Zscaler’s 0.125% convertible notes due 2025 were lower outright as stock marked its largest single-day decline since 2022.

The 0.125% notes were down about 20 points outright with stock off almost 15%.

The notes were changing hands at 146 early in the session and at 147.375 in the late afternoon.

The notes expanded as much as 2 points on the move down, a source said.

Zscaler’s stock traded to a high of $216.50 and a low of $202.44 before closing at $213.92, off 14.10%.

NuVasive active

Globus Medical/NuVasive’s 0.375% convertible notes due 2025 were active although largely unchanged after earnings.

The 0.375% convertible notes were wrapped around 94.5 in active trade, according to a market source.

There was $30 million in reported volume.

Globus Medical’s stock traded to a high of $56.66 and a low of $52.61 before closing at $55, up 1.56%.

Stock saw little volatility after earnings with the results coming in largely as expected.

The medical device company reported earnings per share of 60 cents versus the 61 cents expected and revenue of $616.53 million versus the $608.17 million expected.

However, the activity in the notes may have had more to do with a prospective refinancing, a source said.

The company highlighted its need to address the upcoming maturity of the notes in its earnings report, which may result in additional borrowings under its credit facility or a capital raise through convertible debt or an equity offering, according to the company’s 10-K report.

Globus Medical and NuVasive merged in September 2023 with Globus Medical assuming NuVasive’s convertible notes.

Mentioned in this article:

Global Payments Inc. NYSE: GPN

Globus Medical Inc. NYSE: GMED

Palo Alto Networks Inc. Nasdaq: PANW

Parsons Corp. NYSE: PSN

Sunrun Inc. Nasdaq: RUN

Super Micro Computer Inc. Nasdaq: SMCI

Zscaler Inc. Nasdaq: ZS

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