Morning Commentary: Twitter, Shake Shack, MannKind convertible note offerings eyed

By Abigail W. Adams

Portland, Me., March 1 – The convertibles primary market leapt into action on Monday with three deals totaling $1.625 billion on deck.

Twitter Inc. was responsible the lion’s share of new paper on deck with the social networking site returning to the convertibles market with a $1.25 billion offering of five-year notes, which is set to price after the market close.

The new deal looked 1.625 points cheap based on underwriters’ assumptions.

MannKind Corp. plans to price $150 million of five-year convertible notes and Shake Shack Inc. plans to sell $225 million of seven-year convertible notes after the market close on Monday.

Twitter returns

Twitter plans to price $1.25 billion of five-year convertible notes after the market close on Monday with price talk for a fixed coupon of 0% and an initial conversion premium of 65% to 70%, according to a market source.

The deal was heard to be in the market with assumptions of 150 basis points over Libor and a 45% vol.

Using those assumptions, the deal looked 1.625 points cheap at the midpoint of talk, a source said.

Proceeds from the new offering will be used to cover the amounts due upon the conversion or maturity of the company’s 1% convertible notes due Sept. 15, 2021.

As Twitter’s latest offering was in the work, the company’s 0.25% convertible notes due 2024 were active.

“That’s no surprise,” a source said. Accounts were most likely making room for the new offering.

The 0.25% convertible notes were changing hands at 1,253.375 early in the session.

Twitter’s stock was changing hands at $76.69, a decrease of 0.49%, shortly before 11 a.m. ET.

MannKind on deck

MannKind plans to price $150 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Underwriters were marketing the deal with assumptions of 750 bps over Libor and a 45% vol.

Using those assumptions, the deal modeled a little over 5 points cheap at the midpoint of talk.

However, the short interest in the biotech company is high at 7.06%, a source said.

Shake Shack eyed

Shake Shack plans to sell $225 million of seven-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 40% to 45%, according to a market source.

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

Using those assumptions, the deal looked 0.84 point cheap at the midpoint of talk, according to a market source.

The short interest in the fast-food restaurant chain was also high at 10.12%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.