Morning Commentary: Danaher, Prospect Capital tap convertibles market; LivePerson eyed

By Abigail W. Adams

Portland, Me., Feb. 27 – The convertibles primary market stood poised for its highest volume week of new deal activity in 2019 with $1.68 billion of new paper pricing and another $150 million deal set to price after the market close.

Danaher Corp. priced an upsized $1.5 billion of par of $1,000 three-year series A mandatory convertible preferred stock after the market close on Tuesday.

There was massive demand for the paper, which was trading up in the secondary space.

Prospect Capital Corp. priced $175 million of six-year convertible notes prior to the market open on Wednesday.

While the new notes were not seen trading early in the session, Prospect Capital’s 4.75% convertible notes due 2020 saw some large block trades.

LivePerson, Inc. plans to price $150 million of five-year convertible notes after the market close on Wednesday. The deal looked cheap, sources said.

Danaher sees big demand

Danaher priced an upsized $1.5 billion of par of $1,000 three-year series A mandatory convertible preferred stock after the market close on Tuesday with a dividend of 4.75% and an initial conversion premium of 22.5%.

Pricing came richer than initial price talk for a dividend of 5.25% to 5.75% and at the rich end of talk for an initial conversion premium of 17.5% to 22.5%, according to a market source.

The greenshoe was also upsized to $150 million.

The initial size of the deal was $1.35 billion with a greenshoe of $135 million.

“Everyone loves the name,” a market source said.

There was massive demand for the new mandatory convertible preferreds, which carried over into the secondary space.

The 4.75% mandatory convertible preferreds traded up to 101 early in the session, a market source said.

Danaher stock traded up to $127.21, an increase of 3.25%, shortly before 11 a.m. ET.

The mandatory convertible preferreds priced concurrently with a $1.35 billion, or 11 million share, common stock offering, which priced at $123.00 per share.

Prospect Capital prices

Prospect Capital priced and upsized $175 million of six-year convertible notes prior to the market open on Wednesday at 98 with a coupon of 6.375% to yield 6.89% and an initial conversion premium of 30.68%.

Price talk had been for a reoffer price of 98, a coupon of 6.25% to 6.375% for a yield of 6.76% to 6.89% and an initial conversion premium of 30.68%, according to a market source.

The greenshoe was also upsized to $26.25 million.

The initial size of the deal was $150 million with a greenshoe of $22.5 million.

The deal looked incredibly cheap, a market source said.

However, the business development company has a lot of outstanding debt and is highly leveraged despite its investment-grade rating, a market source said.

LivePerson eyed

LivePerson plans to sell $150 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.625% to 1.125% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be in the market with assumptions of 300 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal modeled a little more than 3 points cheap at the midpoint of talk, the source said.

Other sources also pegged the deal from the tech company as cheap.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.