Convertibles primary to price $3.85 billion in eight deals; existing Redfin notes contract

By Abigail W. Adams

Portland, Me., March 22 – The convertibles primary market continued to churn out deals at a dizzying pace on Monday.

Six deals totaling $2.35 billion are set to price after the market close on Monday and two deals totaling $1.5 billion are on deck for Tuesday.

MP Materials Corp. plans to price $500 million of five-year green convertible notes and ViacomCBS Inc. plans to sell $1 billion par-of-$100 three-year series A mandatory convertible preferred stock after the market close on Tuesday.

Macom Technology Solutions Holdings Inc. plans to price $400 million of five-year convertible notes; Redfin Corp. plans to sell $500 million of six-year convertible notes; Groupon Inc. plans to bring $200 million of five-year convertible notes; JetBlue Airways Corp. plans to price $650 million of five-year convertible notes; TripAdvisor Inc. plans to price $300 million of five-year convertible notes; and Liberty TripAdvisor Holdings, Inc. plans to sell $300 million of exchangeable debentures due 2051 after the market close on Monday.

While each deal modeled cheap based on underwriters’ assumptions, sources felt that some assumptions were too tight.

Several recent deals that have modeled cheap have also underperformed once hitting the aftermarket, which has increased skepticism among market players.

Meanwhile, trading activity in the secondary space was light on Monday as market players eyed the new deals in the pipeline.

There was $353 million on the tape about one hour before the market close.

Redfin’s existing 0% convertible notes due 2025 were contracting on the heels of the real estate technology company’s latest offering.

The calendar

ViacomCBS plans to price $1 billion par-of-$100 three-year series A mandatory convertible preferred stock after the market close on Tuesday with price talk for a dividend of 5.25% to 5.75% and an initial conversion premium of 17.5% to 22.5%.

Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC are bookrunners for the registered offering, which carries a greenshoe of $150 million.

Concurrently, the company plans to price a secondary offering of $2 billion of its class B common stock.

MP Materials plans to sell $500 million of five-year green convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.25% and an initial conversion premium of 25% to 30%, according to a market source.

Macom’s convertible debut

Macom Technology plans to price $400 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.25% and an initial conversion premium of 37.5% to 42.5%.

The deal was heard to be in the market with assumptions of 325 basis points over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked 1.55 points cheap at the midpoint of talk.

The offering is Macom’s debut appearance in the convertibles market.

The assumptions looked accurate, and the pricing seemed decent, a source said.

Redfin looks cheap

Redfin plans to sell $500 million of six-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 35% to 40%.

The deal was heard to be in the market with assumptions of 300 bps over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked 3.95 points cheap at the midpoint of talk.

“It’ll be interesting to see if these come with a coupon,” a source said.

The real estate technology company priced a $661.25 million issue of 0% convertible notes due 2025 at par in October 2020.

If the company’s latest offering comes with a coupon, it will further hurt the outstanding convertible notes.

Redfin’s 0% convertible notes due 2025 were already taking a hit based on the latest offering.

The 0% notes were seen changing hands at 121 bid, 121.75 offered in the late afternoon.

The notes contracted 1 point to 1.5 points dollar-neutral, a source said.

Redfin’s stock traded to a high of $71.63 and a low of $68.78 before closing the session at $69.28, down 4.28%.

Groupon on tap

Groupon plans to price $200 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0.625% to 1.125% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal was heard to be in the market with assumptions of 600 bps over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked 1.64 points cheap at the midpoint of talk.

Proceeds will be used to repay or repurchase the company’s 3.25% convertible notes due 2022 at or prior to their maturity.

Groupon priced a $250 million issue of the 3.25% convertible notes in a private placement with strategic investment firm Atairos in 2016.

JetBlue eyed

JetBlue plans to price $650 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The deal was heard to be in the market with assumptions of 400 bps over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked 2.55 points cheap at the midpoint of talk.

However, some sources felt the credit spread was too tight.

TripAdvisor’s offerings

TripAdvisor plans to price $300 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.25% 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 375 bps over Libor and a 45% vol., which looked 4.5 points cheap at the midpoint of talk, sources said.

In a concurrent offering, parent company Liberty TripAdvisor Holdings plans to sell $300 million of exchangeable debentures due 2051 with price talk for a coupon of 0.25% to 0.5% and an initial exchange premium of 30% to 35%.

The debentures will be issued by Liberty TripAdvisor Holdings and exchangeable for TripAdvisor common stock.

The debentures become freely callable on March 27, 2025; they are putable on March 27, 2025.

The debentures were marketed with assumptions of 525 bps over Libor and a 45% vol., according to a market source.

The deal looked 4.7 points cheap at the midpoint of talk.

Liberty TripAdvisor is the parent company for TripAdvisor.

“There are so many ways to play (the name),” a source said.

However, some sources couldn’t help but note the irony of having the parent company to TripAdvisor price with a higher coupon than the company that it owns.

Mentioned in this article:

Groupon Inc. Nasdaq: GRPN

JetBlue Airways Corp. Nasdaq: JBLU

Liberty TripAdvisor Holdings, Inc. Nasdaq: TRIP

Macom Technology Solutions Holdings Inc. Nasdaq: MTSI

MP Materials Corp. Nasdaq: MP

Redfin Corp. Nasdaq: RDFN

TripAdvisor Inc. Nasdaq: TRIP

ViacomCBS Inc. Nasdaq: VIAC

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