Teladoc, PetIQ, Colliers convertibles on tap; Plug Power, Veeco price; recent deals eyed

By Abigail W. Adams

Portland, Me., May 14 – The convertibles primary market’s new deal flow continued on Thursday with three more overnight offerings on deck and two new deals making their aftermarket debut.

Teladoc Health Inc. plans to price $800 million of seven-year convertible notes, Colliers International Group plans to price $200 million of five-year convertible notes, and PetIQ, Inc. plans to sell $125 million of six-year convertible notes after the market close on Thursday.

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

However, several of the recent deals that modeled cheap continued to cheapen in the secondary.

“Things are getting backed up,” a source said.

Plug Power Inc. and Veeco Instruments Inc. were able to clear the primary market, despite a brutal day for equities on Wednesday and the poor performance of several recent deals in the secondary space.

However, both deals priced cheap with one downsizing.

While volume was light, the new paper from Plug and Veeco dropped below par on debut.

Several recent deals also continued to struggle below par on Thursday, which was a volatile day for the market.

While the notes were trading off their lows by the market close, Cantel Medical Corp.’s 3.25% convertible notes due 2025, Penn National Gaming Inc.’s 0.25% convertible notes due 2026 and Pioneer Natural Resources Co.’s 0.25% convertible notes due 2025 closed Thursday underwater.

Teladoc eyed

Teladoc Health plans to price $800 million of seven-year convertible notes after the market close on Thursday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 35% to 40%.

Underwriters were marketing the deal with assumptions of 500 basis points over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked about 1.5 points cheap at the midpoint of talk, a source said.

The borrow on the telemedicine and virtual health care company’s stock has always been an issue, a source said.

The stock is heavily shorted due to controversy surrounding telemedicine.

However, the company plans to repurchase a portion of its 3% convertible notes due 2022 for cash and shares in privately negotiated transactions with proceeds from the new offering.

The repurchase may help with the borrow, the source said.

While there may have been previous controversy over telemedicine, Teladoc is ahead of the curve with the practice becoming normalized due to the coronavirus pandemic.

Colliers looks cheap

Colliers International Group plans to price $200 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 30% to 35%.

Underwriters were marketing the Rule 144A and Regulation S deal with assumptions of 525 bps over Libor and a 30% vol., according to a market source.

Using those assumptions, the deal looked 8.875 points cheap at the midpoint of talk.

However, the borrow on the Toronto-based company’s equity “might be a little tough,” which would erode the cheapness of the deal, a source said.

Factoring in some difficulty with the borrow, the deal may be more like 5 points cheap at the midpoint of talk, the source said.

The pricing was attractive and the company gave an impressive presentation, a source said.

The notes will be a welcome addition to the convertibles universe, the source said.

PetIQ on deck

PetIQ plans to sell $125 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 25% to 30%.

The deal was being marketed with assumptions of 800 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 9 points cheap at the midpoint of talk.

The pricing of the offering was attractive, a source said.

Plug Power prices

Plug Power priced $200 million of five-year convertible notes after the market close on Wednesday at the cheap end of talk at par with a coupon of 3.75% and an initial conversion premium of 22.5%, according to a Thursday press release.

The notes were talked with a coupon of 3.25% to 3.75% and an initial conversion premium of 22.5% to 27.5%, as previously reported.

The offering was the first convertible green bond marketed in the United States with proceeds to be used to fund the hydrogen fuel cell turnkey manufacturer’s green initiatives.

Trading of the new 3.75% notes was light with the deal “clubby,” a source said.

However, the notes dropped below par as stock cracked early in the session.

They were quoted at 98 bid, par offered early in the session.

However, they rebounded as stock pared its losses and were quoted at 99 bid, 101 offered heading into the market close.

Plug stock traded to a low of $3.80 and a high of $4.08 before closing the day at $4.06, a decrease of 1.22%.

Veeco downsizes

Veeco Instruments priced a downsized $125 million of seven-year convertible notes after the market close on Wednesday at the cheap end of talk with a coupon of 3.75% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 3.25% to 3.75% and an initial conversion premium of 32.5% to 37.5%, as previously reported.

The greenshoe was also reduced to $18.75 million. The initial size of the offering was $150 million with a greenshoe of $22.5 million.

The notes traded down to 98 on Thursday.

However, Veeco Instruments’ 2.7% convertible notes due 2023 were active with more than $7 million in reported volume.

The notes were printing at 92, which may be the buyback price for the notes, a source said.

Approximately $81.2 million of the net proceeds from Veeco’s new offering will be used to repurchase $88.3 million of the principal amount of the 2.7% convertible notes due 2023.

Veeco stock traded to a low of $9.59 and a high of $10.46 before closing the day at $10.44, a decrease of 1.04%.

Below par

Several of the deals that priced earlier in the week were struggling in the aftermarket.

While the notes were trading off their lows as equities rebounded from a sell-off early in the session, new paper from Cantel Medical, Penn National Gaming and Pioneer Natural Resources were still struggling underwater.

Cantel Medical’s 3.25% convertible notes due 2025 traded as low as 94.5.

However, the notes recovered as stock caught a bid and the 3.25% notes climbed back to 98 bid, 99 offered late Thursday afternoon.

Cantel Medical stock traded to a low of $29.74 and a high of $33.68 before closing the day at $33.59, an increase of 7.18%.

Penn National’s 0.25% convertible notes due 2026 traded as low as 91 early Thursday but stood poised to close the day at 95.5 bid, 96.5 offered.

Penn National stock traded to a low of $16.00 and a high of $18.09 before closing the day at $17.72, an increase of 7.13%.

Pioneer Natural Resources’ 0.25% convertible notes due 2025 traded down to a 95-handle early Thursday.

However, they traded off their lows as crude oil futures surged 10% heading into the afternoon.

The 0.25% notes were marked at 98 bid, 98.75 offered in the late afternoon.

Pioneer Natural Resources stock traded to a low of $76.48 and a high of $84.00 before closing the day at $82.21, an increase of 3.54%.

Mentioned in this article:

Cantel Medical Corp. NYSE: CMD

Colliers International Group Nasdaq: CIGI

Penn National Gaming Inc. Nasdaq: PENN

PetIQ, Inc. Nasdaq: PETQ

Pioneer Natural Resources Co. NYSE: PXD

Plug Power Inc. Nasdaq: PLUG

Teladoc Health Inc. NYSE: TDOC

Veeco Instruments Inc. Nasdaq: VECO

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