Morning Commentary: Plug Power, Veeco on tap; $2.04 billion of paper floods secondary

By Abigail W. Adams

Portland, Me., May 13 – The convertibles primary market’s new deal flow slowed to a steady stream on Wednesday with two overnight offerings totaling $350 million on deck following the torrent of $2.04 billion in five deals that priced after the market close on Tuesday.

Plug Power Inc. plans to price $200 million of five-year convertible notes and Veeco Instruments Inc. plans to price $150 million of seven-year convertible notes after the market close on Wednesday.

The deals looked cheap based on underwriters’ assumptions, sources said.

Plug Power’s latest offering makes history as the first green convertible bond offering to be marketed in the United States.

As market players eyed the new deals in the pipeline, the secondary space was again flooded with $2.04 billion of new paper.

Lyft Inc. priced $650 million of five-year convertible notes, Cloudflare Inc. sold $500 million five-year convertible notes, Zillow Group Inc. priced $500 million of five-year convertible notes, Tandem Diabetes Care Inc. priced $250 million of five-year convertible notes and Cantel Medical Corp. brought a downsized $140 million five-year convertible notes.

The performance of the new paper was mixed.

Veeco eyed

Veeco Instruments plans to price $150 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of 850 basis points over Libor and a 40% vol.

Using those assumptions, the deal looked about 4.2 points cheap at the midpoint of talk, a market source said.

Plug’s green convertible

Plug Power plans to price $200 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

The deal was heard to be in the market with assumptions of 1,000 bps over Libor and a 40% vol.

Using those assumptions, the deal looked about 5.875 points cheap at the midpoint of talk, a market source said.

Plug Power’s offering marks the first green convertible bond offering in the United States with proceeds going toward green initiatives.

The designation broadens the investor base for the convertible, sources said.

Lyft’s first convertible

Lyft priced $650 million of five-year convertible notes after the market close on Tuesday at par at the midpoint of talk with a coupon of 1.5% and an initial conversion premium of 30%.

Price talk was for a yield of 1.25% to 1.75% and an initial conversion premium of 27.5% to 32.5%.

The new paper saw a lackluster reception in the secondary space.

The notes were changing hands between 99 and par early in the session with stock off about 2%, a market source said.

Zillow below par

Zillow Group sold $500 million of five-year convertible notes after the market close on Tuesday at the midpoint of talk at par with a coupon of 2.75% and an initial conversion premium of 40%.

Price talk was for a coupon of 2.5% to 3% and an initial conversion premium of 37.5% to 42.5%.

Concurrently with the convertible notes offering, the company intends to repurchase $194.7 million of its 2% convertible notes due 2021 in privately negotiated transactions for a total repurchase cost of $232.6 million, which consists of $196.4 million in cash and 753,936 shares of class C capital stock.

The company also priced a secondary offering of $384 million, or 8 million shares, of its class C capital stock at a public offering price of $48.00.

Zillow’s new 2.75% notes were also trading below par on an outright basis.

They were changing hands between 98 and 99 about one hour into the session with stock down about 4%.

Tandem outperforms

Tandem Diabetes priced $250 million of five-year convertible notes after the market close on Tuesday at par at the cheap end of talk with a coupon of 1.5% and an initial conversion premium of 30%.

Price talk was for a coupon of 1% to 1.5% and an initial conversion premium of 30% to 35%, according to a market source.

The new 1.5% notes skyrocketed on an outright and dollar-neutral basis. They traded as high as 104, but the majority of trades were between 102.5 and 103.5 on an outright basis with stock largely unchanged.

They were up 2 to 3 points dollar-neutral, a market source said.

Cloudflare trades up

Cloudflare sold $500 million five-year convertible notes after the market close on Tuesday at par at the midpoint of talk with a coupon of 0.75% and an initial conversion premium of 30%.

Price talk was for a coupon of 0.5% to 1% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The new 0.75% notes were changing hands between par and 101 early in the session with stock down about 1%.

The notes were expanding dollar-neutral, a market source said.

Cantel downsizes

Cantel Medical priced a downsized $140 million five-year convertible notes after the market close on Tuesday at par at the cheap end of talk with a coupon of 3.25% and an initial conversion premium of 30%.

Price talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 30% to 35%, according to a market source.

The notes were not active early Wednesday.

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