DISH megadeal, iQIYI on tap; Vail convertible offering eyed; Zynga, TechTarget expand

By Abigail W. Adams

Portland, Me., Dec. 15 – The convertibles primary market roared into the final weeks of December with three deals on tap, including one of the largest deals year to date.

DISH Network Corp. plans to price $2 billion of five-year convertible notes after the market close on Wednesday.

iQIYI Inc. is also on deck with an $800 million offering of six-year convertible notes.

Vail Resorts Inc. is also on deck with a $500 million offering of five-year convertible notes that is slated to price after the market close.

The deal looked cheap based on underwriters’ assumptions. However, some sources felt those assumptions were aggressive.

Meanwhile, new paper from Zynga Inc. and TechTarget Inc. dominated activity in the secondary space with both making gains on an outright and dollar-neutral basis.

The calendar

The forward calendar continued to grow on Tuesday with two new offerings launching after the close, including one of the largest year to date.

DISH Network plans to price $2 billion of five-year convertible notes after the market close on Wednesday with price talk for a fixed coupon of 0% and an initial conversion premium of 30% to 40%, according to a market source.

Morgan Stanley & Co. LLC is the bookrunner for the Rule 144A offering, which carries a greenshoe of $300 million.

iQIYI is also on deck with an $800 million offering of six-year convertible notes.

Goldman Sachs (Asia) LLC, BofA Securities Inc. and J.P. Morgan Securities LLC are bookrunners for the offering, which carries a greenshoe of $100 million.

Further details were not available as of press time.

Vail looks cheap

Vail Resorts plans to price $500 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 40% to 45%.

The deal was heard to be marketed with assumptions of 350 basis points over Libor and a 40% vol., a source said.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk.

However, some sources felt those assumptions were aggressive and pegged the credit spread more toward 400 bps.

“They have good assets, but looking at the numbers that seems a little aggressive,” a source said.

The company has a lot of debt, the source said.

Vail Resorts is a serial issuer of high-yield notes.

However, in contrast to other cross-over issuers from the high-yield market earlier in the year, the offering was opportunistic with the mountain resort operator taking advantage of attractive pricing.

The company is a welcome addition to the convertibles universe from a diversification perspective, another source said.

Diversification of the issuer base in the convertible universe has been one of the trends of 2020 with consumer discretionary companies becoming a more prominent player in the market.

However, Vail Resorts’ stock is largely seasonal and “appears to be near a seasonal peak (pun intended),” a source said.

While there was no indication the deal had repriced by the mid-afternoon, it was heard to be doing well during bookbuilding and is expected to trade well in the secondary space.

Zynga dominates

Zynga priced an upsized $762 million, from $750 million, of six-year convertible notes after the market close on Monday at par at the rich end of tightened talk with a coupon of 0% and an initial conversion premium of 50%.

Price talk tightened to a fixed coupon of 0% and an initial conversion premium of 47.5% to 50%, according to a market source.

Initial price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 42.5% to 47.5%.

The new paper was in focus in the secondary space and traded up on debut.

The notes were trading in a tight range of 101.5 to 102 throughout Tuesday’s session.

They expanded about 1 point dollar-neutral, a source said.

Zynga’s stock traded to a low of $8.82 and a high of $9.16 before closing the day at $9.12, an increase of 4.71%.

TechTarget gains

TechTarget priced $175 million of five-year convertible notes after the market close on Monday at par with a coupon of 0.125% and an initial conversion premium of 40%.

Pricing came at the rich end of initial price talk for a coupon of 0.125% to 0.625% and at the rich end of revised talk for an initial conversion premium of 35% to 40%, according to a market source.

Initial talk was for a conversion premium of 30% to 35%.

The notes were making gains on an outright and dollar-neutral basis.

The notes traded as high as 102.75 before settling to trade in the 102 to 102.25 range.

The notes were up 1.25 points dollar-neutral, a source said.

TechTarget’s stock traded to a low of $50.08 and a high of $52.77 before closing the day at $52.63, an increase of 4.61%.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

iQIYI Inc. Nasdaq: IQ

TechTarget Inc. Nasdaq: TTGT

Vail Resorts Inc. NYSE: MTN

Zynga Inc. Nasdaq: ZNGA

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