Morning Commentary: Everbridge offering eyed; Western Asset prices; Lumentum in focus

By Abigail W. Adams

Portland, Me., Dec. 10 – The convertibles primary market was active in one of the final weeks of the year for new deal activity with two deals pricing and one more on tap.

Everbridge Inc. plans to price $375 million of five-year convertible notes after the market close on Tuesday. The deal looked cheap based on underwriters’ assumptions, sources said.

Western Asset Mortgage Capital Corp. priced a $50 million tap of its 6.75% convertible notes due 2022 at the midpoint of talk for a reoffer price of 101.25 and a yield to maturity of 6.252%, according to an FWP filing with the Securities and Exchange Commission.

The deal was well oversubscribed, a market source said.

Lumentum Holdings Inc. priced an upsized $900 million of seven-year convertible notes after the market close on Monday.

The new notes dominated activity in the secondary space. However, the notes dipped below par in the high-volume activity.

The deal is expected to be the last large convertible notes offering of the year as activity in the primary market winds down.

Everbridge ahead

Everbridge plans to price $375 million of five-year 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 32.5% to 37.5%.

The deal from the Burlington, Mass.-based global software company is being marketed with assumptions of 300 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal modeled about 1.25 points cheap at the midpoint of talk, the source said.

The credit spread seemed tight for a software company, with the software sector in general taking a beating in recent weeks, another source said.

Everbridge plans to use a portion of the proceeds to repurchase up to 20% of the principal amount of its 1.5% convertible notes due 2022.

Remaining proceeds will also be used in part to prepay the redemption of the 1.5% convertible notes when they become callable on Nov. 6, 2020, according to a company news release.

Western Asset eyed

Western Asset Mortgage Capital priced a $50 million tap of its 6.75% convertible notes due 2022 at the midpoint of talk for a reoffer price of 101.25 and a yield of 6.252%, according to an FWP filing.

Price talk was for a reoffer price of 101 to 101.5, according to a market source.

The deal was well oversubscribed, a market source said.

With investors chasing yields, the short-duration paper with a yield of 6.25% was an attractive offering, the source said.

While volume was light, the 6.75% notes were marked at 101.5 bid, 101.875 offered in the aftermarket, a source said.

Lumentum below par

Lumentum sold an upsized $900 million of seven-year convertible notes after the market close on Monday at par to yield 0.5% with an initial conversion premium of 42.5%, according to a company news release.

Pricing came at the midpoint of talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 40% to 45%, according to a market source.

The deal was upsized from $850 million. The greenshoe was also upsized to $200 million from $127.5 million.

The new paper dominated activity in the secondary space, accounting for $61 million of the $124 million in reported volume about one hour into Tuesday’s session.

However, the notes were dipping below par in the high-volume activity.

The new 0.5% notes were changing hands at 99.8 with stock off, a market source said.

Lumentum’s 0.25% convertible notes due 2024 were the second most active issue in the secondary space.

The 0.25% notes were changing hands at 133.375 early in the session, a market source said.

Lumentum stock was $68.44 shortly before 11 a.m. ET, a decrease of 1.78%.

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