Morning Commentary: Twitter convertible notes in focus following junk bond pricing

By Abigail W. Adams

Portland, Me., Dec. 6 – The convertible secondary space returned to its normal pace on Friday with activity surrounding new paper from Allscripts Healthcare Solutions, Inc. waning.

There was $60 million on the tape about one hour into Friday’s session with only one name seeing more than $5 million in reported volume.

And that name was Twitter Inc.

Twitter’s 1% convertible notes due 2021 were active following the social media company’s debut appearance in junkbondland.

The 1% convertible notes were trading at 97.375 early in Friday’s session with about $8 million on the tape, a market source said.

Twitter stock was $30.30, an increase of 0.87%, shortly before 11 a.m. ET.

Twitter’s newly priced junk bond spurred activity in the 1% convertible notes with the credit rating given to Twitter’s junk bonds increasing the attractiveness of its convertibles, the source said.

In a deal that was heard to be as much as 4x oversubscribed, Twitter priced an upsized $700 million issue of eight-year bullet notes at par to yield 3 7/8%.

The deal was one of the most tightly priced high-yield deals of 2019 with only a few achieving a 3-handle, according to Prospect News data.

Moody’s Investors Service assigned a Ba2 rating and S&P Global Ratings a BB+ rating to Twitter’s notes.

Twitter’s high-yield deal was an opportunistic capital raise with proceeds earmarked for general corporate purposes.

With the maturity of the 1% notes looming, there is speculation the company may decide to apply some of the proceeds from the high-yield bonds to retire the convertible notes, a market source said.

Meanwhile, Allscripts’ newly priced 0.875% convertible notes due 2027 were not active early in Friday’s session with only one print on the tape at par.

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