Allscripts convertibles offering eyed; Chesapeake in focus; Liberty Media notes active

By Abigail W. Adams

Portland, Me., Dec. 4 – The convertibles primary market has logged another record-setting year with $56 billion in new issuance year to date, compared to $50 billion at this time last year, according to data compiled by Prospect News. While only a few weeks remain until year-end, the new deal activity continues.

Allscripts Healthcare Solutions, Inc. plans to price $200 million of seven-year convertible notes after the market close on Wednesday.

While some sources pegged the deal as cheap using underwriters’ assumptions, others felt the health care technology company deserved a wider credit spread.

Meanwhile, there was a fair amount of activity in the secondary space as equity markets rebounded from Tuesday’s sell-off due to renewed optimism on about a U.S.-China trade pact.

Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 were active and trading “all over the place” following news of an amended credit agreement.

Liberty Media Corp.’s 2.75% notes due 2049 exchangeable into Sirius XM Holdings Inc. remained active with the notes gaining since pricing.

Allscripts eyed

Market players were eyeing Allscripts’ new offering, which some pegged as cheap while others felt the pricing was tight.

Allscripts plans to price $200 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.75% to 1.25% 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 a credit spread of 325 basis points over Libor and a 34% vol., according to a market source.

Using those assumptions, one source pegged the deal 1.5 points cheap at the midpoint of talk.

The borrow on the company’s stock is decent, the source said.

Some saw the credit spread even tighter at 300 bps over Libor. However, the company’s credit facility is 375 bps over Libor.

While the deal modeled cheap using underwriters’ assumptions, other sources felt the pricing was tight even with a wider credit spread of 375 bps.

“Investors aren’t getting anything anymore on these new deals,” a source said.

The health care technology company has over $1 billion in debt, including $345 million outstanding in 1.25% convertible notes due July 2020.

Those notes were unchanged at 99.5 following the announcement of the new offering, sources said.

While the 1.25% notes mature in less than one year, proceeds will be used to repay the outstanding borrowings under the company’s senior revolving credit facility.

“There’s no point in taking out a 1.25% piece of paper early if you can take out straight debt,” another source said.

However, Allscripts will still have to raise capital to retire the 1.25% notes when the time comes, a source said.

While sources diverged about the attractiveness of the deal, the new offering was heard to be trading up in the gray market with the notes marked at 100.125 bid, 100.875 offered.

Chesapeake Energy active

Chesapeake Energy’s 5.5% convertible notes due 2026 were active on Wednesday following news of an amended credit agreement.

However, the notes were “all over the place” in the high-volume activity, a source said.

The 5.5% notes changed hands as high at 46 early in Wednesday’s session but came in to trade at 42 in the late afternoon.

The 5.5% convertible notes have long been busted. However, the notes sank from the low 50s to the low 40s following a sell-off in early November.

The energy company stated in its third-quarter earnings report that its ability to continue operations as a ‘going concern’ was in doubt if depressed oil prices continue.

Chesapeake Energy’s stock soared on Wednesday following news it had amended its credit agreement to lift its secured debt limits.

However, doubt remains about the company’s future viability, Bloomberg reported.

In addition to amending its credit agreement, Chesapeake announced plans to obtain a $1.5 billion loan package, buy back $700 million of its 2025 notes and swap other bonds for new securities.

Liberty Media active

Liberty Media’s recently priced 2.75% notes due 2049 exchangeable into Sirius XM stock continued to see active trading its third week in the secondary space.

The 2.75% notes continued to improve on an outright basis on Wednesday although the notes were relatively unchanged dollar-neutral, sources said.

The 2.75% notes traded up to 102.25 on Wednesday as Sirius stock improved.

Sirius stock closed Wednesday at the high of the day of $6.87, an increase of 1.33%.

While the 2.75% notes were unchanged dollar-neutral on Wednesday, they have gained more than 1 point on swap since pricing on Nov. 21, a source said.

Mentioned in this article:

Allscripts Healthcare Solutions, Inc. Nasdaq: MDRX

Chesapeake Energy Corp. NYSE: CHK

Sirius XM Holdings Inc. Nasdaq: SIRI

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