Bally’s pulls equity units offering; Greenbrier ups convertibles offering; Li Auto sinks

By Abigail W. Adams

Portland, Me., April 15 – While Thursday began with two deals on the convertibles forward calendar, it ended with one.

Bally’s Corp. pulled its planned offering of $250 million of three-year par-of-$50 equity units in favor of a private placement with a strategic investor.

Bally’s stock popped mid-session with hedge funds most likely covering the short positions taken in anticipation of the completed deal, sources said.

While Bally’s deal was canceled, Greenbrier Cos., Inc.’s offering of seven-year convertible notes was in demand during bookbuilding with the deal upsizing, sources said.

Meanwhile, the secondary space was firmer on Thursday as equities and bond markets rallied on the heels of positive earnings.

However, the American Depositary Shares of several China-based companies were heavy amid a U.S. diplomatic trip to Taiwan, despite warnings from China.

Li Auto Inc.’s recently priced 0.25% convertible notes due 2028 hit their lowest outright level since pricing last week with the notes now in the low 90s.

Greenbrier upsizes

Greenbrier’s offering of seven-year convertible notes were in demand during bookbuilding with the offering upsizing.

The deal from the supplier of equipment and services to the global freight transportation markets upsized to $325 million from $275 million, according to a market source.

Pricing was believed to be unchanged with the deal coming with a coupon of 2.375% to 2.875% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 450 basis points over Libor and a 35% vol., which looked 2.08 points cheap at the midpoint of talk, a source said.

Concurrently, the company plans to repurchase a portion of its 2.875% convertible notes due 2024 in privately negotiated transactions.

The 2.875% notes were changing hands at 109 on Wednesday in the run up to the new offering.

The company also plans to purchase up to $20 million of its common stock with proceeds from the offering, making the deal the latest “happy meal,” or convertible bond deal that involves a stock repurchase, to price.

Bally’s pulls offering

Bally’s pulled its planned offering of $250 million three-year par-of-$50 equity units, which were slated to price after the market close on Thursday.

The company canceled the offering and now plans to instead pursue a private placement of equity-linked securities with a strategic investor, according to a company news release.

Bally’s initially planned to price $250 million three-year par-of-$50 equity units after the market close on Thursday with price talk for a dividend of 6% to 6.5% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The equity units were heard to be in the market with assumptions of 400 bps over Libor and a 50% to 45% vol. skew, according to a market source.

Using those assumptions, the deal looked 2.52 points cheap at the midpoint of talk, a source said.

However, other sources saw the deal as rich.

Bally’s stock popped mid-session on Thursday, which sources believed was the result of hedge funds covering the short positions taken in anticipation of the completion of the deal.

The deal was halted when stock was trading at $55.48, a source said.

Stock shot up following the announcement and closed the day at $57.82, an increase of 8.56%.

While Bally’s is the first officially pulled deal of the year, Tyler Technologies Inc.’s massively downsized deal also caught hedge funds off-guard and resulted in unanticipated short-coverings.

Tyler Technologies initially planned to price a $1.6 billion two-tranche offering of convertible notes in early March at the height of the sell-off in the tech sector.

The deal was downsized to a single $525 million tranche of five-year convertible notes.

Li Auto’s new low

Li Auto’s 0.25% convertible notes due 2028 hit a new low on Thursday.

The notes dropped more than 4 points outright with the company’s equity down more than 6%.

The 0.25% notes were changing hands at 93.5 versus a stock price of $19.56 at the market close, according to a market source.

The Beijing-based electric vehicle manufacturer’s ADSs traded to a high of $20.96 and a low of $19.20 before closing the day at $19.68, a decrease of 6.73%.

“I’m surprised to see it fall apart, it was so hot out of the gate,” a source said.

The notes have been on a downward spiral throughout the week after initially trading as high as 103 on an outright basis and expanding dollar-neutral on their aftermarket debut April 8.

While equity markets broached fresh heights on Thursday, the ADSs of China-based companies underperformed.

In addition to China president Xi Jinping’s crackdown on the country’s tech behemoths, fresh tensions between the United States and China are brewing following the United States’ first diplomatic trip to Taiwan since 1979.

China issued a strong warning to the U.S. about the visit, which China considers its territory, and recently engaged in military drills near the island.

Mentioned in this article:

Bally’s Corp. NYSE: BALY

Greenbrier Cos., Inc. NYSE: GBX

Li Auto Inc. Nasdaq: LI

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