Morning Commentary: Bill.com notes move up on debut; Booking, Prospect Capital active

By Rebecca Melvin

New York, Nov. 25 – Bill.com Holdings Inc.’s newly priced 0% notes gained in active trading on an outright basis and were seen to have expanded on a dollar-neutral basis early Wednesday after the software company priced an upsized $1 billion of the five-year paper at the rich end and beyond the rich end of price talk.

Trading in the issue was very active, accounting for more than double all other trading combined.

The new Bill.com notes changed hands last at 103.75 when the underlying shares were up 2.5%.

The company was seen to have been worth 102 in valuations at the midpoint of price talk ahead of final terms being set. One source put a credit spread of 350 basis points over Libor on the valuation and another source saw the spread at 275 bps. A software company with a $9 billion market capitalization merited the lower spread, the source said.

Elsewhere, Booking Holdings Inc. was a top volume name. Its 0.75% convertibles due 2025 were seen to have changed hands at 141.75. The underlying shares of the travel company were down $56.08, or 2.7%, at $2,047.37.

Another name in trade was Prospect Capital Corp. Its 6.375% convertibles due 2025 were seen to have traded at 102.25. The underlying shares of the business development company were up 0.75% at $5.47 at late morning.

New Bill.com adds

The new Bill.com convertibles traded up to a 104 handle before averaging out at 103.25 to 103.50, according to a market source.

The Palo Alto, Calif.-based cloud-based software company, which automates back-office financial operations for small and mid-size businesses, priced an upsized $1 billion of the notes due 2025 with a 0% coupon and a 47.5% initial conversion premium.

The issue was initially talked at $750 million in size. The greenshoe for the Rule 144A deal was upsized to $150 million from an initially talked $112.5 million.

Pricing came at the rich end of talk for a 0% to 0.25% coupon, and beyond the rich end of 40% to 45% talk for the initial conversion premium.

Goldman Sachs & Co. LLC, BofA Securities Inc., Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC were joint bookrunners for the offering.

The notes are non-callable for three years and then are provisionally callable after Dec. 5, 2023 if shares exceed 130% of the conversion price for a specified period of time.

There are no puts and settlement will be in cash, shares or a combination of cash and shares at the issuer’s option.

There is change-of-control protection via a make-whole adjustment premium of incremental shares delivered upon conversion, and also dividend protection via conversion rate adjustment on any quarterly dividends.

In connection with the offering of notes, the company entered into capped call transactions with some of the initial purchasers of the notes.

The proceeds of the new notes will be used to fund the cost of the call spread and for general corporate purposes, which may include working capital, capital expenditures and potential acquisitions and strategic transactions.

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