Morning Commentary: RingCentral offers $1 billion convertibles; NuVasive below par

By Abigail W. Adams

Portland, Me., Feb. 27 – The convertible primary market continued to bring forward a steady stream of overnight deals as the carnage continued in equities with the Dow Jones industrial average, S&P 500 index and Nasdaq Composite all opening Thursday down more than 3%.

While the volatility that has rocked markets has sidelined deal-making in other asset classes, the convertible primary market was prepping the fourth deal of the week.

RingCentral Inc. plans to price $1 billion of five-year convertible notes after the market close on Thursday with price talk for a fixed coupon of 0% and an initial conversion premium of 50% to 55%, according to a market source.

Proceeds will be used, in part, to repurchase 1 million shares from purchasers of the notes and to repurchase up to $230 million of the principal amount of its 0% convertible notes due 2023 for cash through privately negotiated transactions.

The company does not anticipate using more than $650 million for the combined share and note repurchases, according to a company news release.

The deal was heard to be marketed with assumptions of 175 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 0.5 point rich with a coupon of 0% and an initial conversion premium of 52.5%, a source said.

Other sources expressed some apprehension about the large offering given current market conditions.

Meanwhile, NuVasive Inc.’s newly priced convertible notes hit the secondary space on Thursday and dropped below par soon after the opening bell.

NuVasive priced $450 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 0.375% and an initial conversion premium of 35%.

Pricing came at the rich end of talk for a coupon of 0.375% to 0.875% and at the midpoint of talk for an initial conversion premium of 32.5% to 37.5%, according to a market source.

The new 0.375% notes traded as low as 98.25 on an outright basis with stock off more than 3% early in the session.

NuVasive stock was changing hands at $68.07, a decrease of 1.49%, shortly before 11 a.m. ET.

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