Xerox convertibles join calendar; primary to price $3.95 billion in six deals post-close

By Abigail W. Adams

Portland, Me., March 5 – The green light remained blazing in the convertibles primary market on Tuesday with $3.95 billion in six deals set to price post-close and one $300 million offering on deck for Wednesday.

Xerox Holdings Corp. plans to price $300 million of six-year convertible notes after the market close on Wednesday with price talk for a coupon of 4% to 4.5% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

Citigroup Global Markets Inc. is bookrunner for the Rule 144A offering, which carries a greenshoe of $45 million.

The deal joins a packed calendar with SoFi Technologies Inc., MicroStrategy Inc., Tandem Diabetes Care Inc., Kosmos Energy Ltd., LivaNova plc and Albemarle Corp. all expected to price their offerings post-close.

There was little doubt the deals would get done with the offerings modeling cheap and demand for new paper strong.

However, sources do expect to see some indigestion amid the deluge of new paper.

If the deals price as announced, Tuesday would mark the single highest volume day by face amount since Sept. 9, 2021 and busiest by number of transactions since March 2, 2021.

The primary market cleared $3.97 billion in three deals on Sept. 9, 2021 and $4.439 billion in seven deals on March 2, 2021, according to the Prospect News database.

While market players eyed the onslaught of deals expected post-close, new paper from MP Materials Corp. and iRhythm Technologies Inc. made its aftermarket debut.

The new paper hit the secondary space on a red day for equities with the Dow Jones industrial average closing Tuesday down 405 points, or 1.04%, the S&P 500 index closing down 1.02%, the Nasdaq Composite index closing down 1.65% and the Russell 2000 index closing down 0.99%.

iRhythm’s new convertible notes were strong on debut and making large outright and dollar-neutral gains.

However, MP Materials was “sloppy,” with the notes dropping well below par as stock plunged in abnormally high volume on Tuesday.

However, the notes held on hedge with the convertibles flat to up slightly dollar-neutral.

SoFi eyed

SoFi plans to price $750 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 400 basis points over SOFR and a 45% vol.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk, a source said.

While proceeds from the new convertible notes offering will be used to redeem the company’s 12.5% series 1 preferred stock, the company also addressed its outstanding 0% convertible notes due 2026.

In a separate transaction, SoFi entered into privately negotiated exchange agreements to exchange $600 million in principal of the 0% notes for 61,713,287 shares of common stock.

“This was excellent liability management,” a source said.

MicroStrategy adds Bitcoin

MicroStrategy plans to price $600 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 37.5% to 42.5%.

The deal was heard to be in the market with assumptions of 350 bps over SOFR and a 50% vol.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk.

While MicroStrategy has an upcoming maturity with its 0.75% convertible notes due 2025, the deal did not come as a refinancing; instead, proceeds will be used to purchase more Bitcoin.

The offering comes on the same day Bitcoin blew to a new all-time high with the price hitting $69,210 early Tuesday.

“They should have done this when Bitcoin was at $25,000,” a source said. “But if you’re an institution that can’t own Bitcoin and you want some in your portfolio this is how you do it.”

Tandem in focus

Tandem plans to price $250 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 25% to 30%.

The deal was heard to be in the market with assumptions of 450 bps over SOFR and a 42% vol.

Using those assumptions, the deal looked about 1.875 points cheap at the midpoint of talk, a source said.

The deal is coming as a refinancing with proceeds to be used to repurchase a portion of its 1.5% convertible notes due 2025 for cash in privately negotiated transactions.

Kosmos Energy eyed

Kosmos Energy plans to sell $300 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.875% to 3.375% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 600 bps over SOFR and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk, a source said.

LivaNova on tap

LivaNova plans to sell $300 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 400 bps over SOFR and a 35% vol.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of talk, a source said.

Albemarle eyed

Albemarle plans to bring $1.75 billion, or 35 million, three-year $50-par depositary shares representing a 1/20th interest in a share of $1,000-par series A mandatory convertible preferred stock after the market close on Tuesday with price talk for a dividend of 7% to 7.5% and an initial conversion premium of 17.5% to 22.5%.

The deal was heard to be in the market with assumptions of 250 bps over SOFR and a 50% to 47% vol. skew, a source said.

The deal looked cheap but not as cheap as the convertible bond deals on deck, a source said.

iRhythm strong

iRhythm priced an upsized $575 million, from $450 million, of long five-year convertible notes after the market close on Monday at par with a coupon of 1.5% and an initial conversion premium of 35%.

Pricing came at the rich end of talk for a coupon of 1.5% to 2% and through the rich end of talk for an initial conversion premium of 27.5% to 32.5%.

The strong demand seen during book building followed the notes into the secondary space where they made large outright and dollar-neutral gains.

The notes were trading around 102 early in the session.

They were marked at 101.875 versus a stock price of $107.72 in the late afternoon.

They expanded about 2.5 points dollar-neutral, a source said.

There was $128 million in reported volume.

iRhythm’s stock traded to a low of $105.80 and a high of $108.88 before closing at $107.43, down 1.49%.

MP Materials ‘sloppy’

MP Materials sold an upsized $650 million, from $500 million, of six-year convertible notes after the market close on Monday at par at the midpoint of talk with a coupon of 3% and an initial conversion premium of 40%.

Price talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 37.5% to 42.5%.

The new paper was weak on an outright basis with the notes dropping well below par.

However, they held on hedge with the notes flat to slightly expanded dollar-neutral, a source said.

MP Materials briefly traded above par early in the session before dropping alongside stock.

They were trading at 95.875 versus a stock price of $14.27 in the late afternoon.

The notes were flat to expanded about 0.25 point dollar-neutral, sources said.

MP Materials’ stock was under pressure in unusually high volume on Tuesday, which was a little head scratching with $191.6 million of net proceeds earmarked to repurchase 12.3 million shares, a source said.

However, the heavy selling in stock may have been connected to the repurchase of the 0.25% convertible notes due 2026 with hedge positions being unwound.

Approximately $358.4 million of net proceeds were used to repurchase $400 million in principal of the company’s 0.25% convertible notes.

MP Materials’ stock traded to a low of $14.04 and a high of $15.72 before closing at $14.27, off 8.11%.

Volume in stock was 29 million shares versus the 2.79 million average.

Mentioned in this article:

Albemarle Corp. NYSE: ALB

iRhythm Technologies Inc. Nasdaq: IRTC

Kosmos Energy Ltd. NYSE: KOS

LivaNova plc Nasdaq: LIVN

MicroStrategy Inc. Nasdaq: MSTR

MP Materials Corp. Nasdaq: MP

SoFi Technologies Inc. Nasdaq: SOFI

Super Micro Computer Inc. Nasdaq: SMCI

Tandem Diabetes Care Inc. Nasdaq: TNDM

Xerox Holdings Corp. Nasdaq: XRX

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