Dick’s convertible offering eyed; Coherus tightens talk; Burlington, Sabre, Natera gain

By Abigail W. Adams

Portland, Me., April 14 – The onslaught of overnight deals in the convertibles market continued on Tuesday with two more offerings on deck.

Dick’s Sporting Goods, Inc. plans to price $500 million of five-year convertible notes and Coherus Biosciences, Inc. plans to sell $200 million of six-year convertible notes after the market close on Tuesday.

The deals looked cheap based on underwriters’ assumptions.

Coherus was heard to be playing to heavy demand with price talk tightening during the subscription process.

As market players eyed the new deals in the works, $1.25 billion of new paper hit the secondary space.

Burlington Stores Inc. priced $700 million of five-year convertible notes, Natera Inc. priced $250 million of seven-year convertible notes and Sabre Corp. priced an upsized $300 million of five-year exchangeable notes after the market close on Monday.

“It’s clear that the window is open,” a market source said of the new deal activity.

The new paper was in focus in the secondary space with all expanding on their debut.

The tone of the market continued to improve on Tuesday with names that were badly battered in March staging a massive rebound, credit spreads continuing to narrow, and equities on the rise.

Dick’s looks cheap

Dick’s Sporting Goods plans to price $500 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be marketed with a credit spread of 800 basis points over Libor and a 40% vol.

Using those assumptions, the deal modeled 5.75 points cheap at the midpoint of talk, a source said.

However, another source pegged assumptions at 1,200 bps over Libor and a 45% vol., which modeled about 0.5 point cheap.

The company recently furloughed nearly all of its employees, suspended its dividend and drew down $1.2 billion from its revolving credit facility.

With a market cap of $2 billion, “I thought using 1,200 bps was being liberal,” the source said.

Dick’s is the second retailer to tap the convertibles market in as many days.

“This is one of the only places they can raise money right now,” a source said.

Coherus talks

Coherus Biosciences plans to price $200 million of six-year convertible notes after the market close on Tuesday.

The deal was heard to be playing to solid demand with talk tightening to a coupon of 1.5% to 1.75% and an initial conversion premium of 30%, according to a market source.

Initial price talk was for a yield of 1.75% to 2.25% and an initial conversion premium of 25% to 30%, according to a market source.

The deal was heard to be marketed with assumptions of 700 bps over Libor and a 40% vol., which modeled about 4.42 points cheap at the midpoint of initial price talk, a source said.

Using assumptions of 750 bps over Libor and a 45% vol., the deal modeled about 5.6 points cheap at the midpoint of initial talk, another source said.

However, the borrow on the stock is difficult.

Despite the difficulty with the borrow, the deal was in demand during book building with the small biotech company favored by investors, a source said.

Burlington trades up

Burlington Stores priced $700 million of five-year convertible notes after the market close on Monday at par at the rich end of talk with a coupon of 2.25% and an initial conversion premium of 32.5%.

Price talk was 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.

The 2.25% convertible notes skyrocketed out of the gate.

The notes were changing hands between 104 to 105.5 on an outright basis early in the session. They traded up to 106 in the late afternoon.

They were expanded about 3.25 points dollar-neutral, a market source said.

Burlington stock traded to a low of $168.33 and a high of $178.15 before closing the day at $177.18, an increase of 6.63%.

Natera expands

Natera sold $250 million of seven-year convertible notes after the market close on Monday at par to yield 2.25% with an initial conversion premium of 30%.

Pricing came at rich end of price talk for a coupon of 2.25% to 2.75% and at the midpoint of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The notes were changing hands around 103.5 early in the session. They rose to 105 in the late afternoon.

They were expanded more than 3 points dollar-neutral, a market source said.

Natera stock traded to a low of $30.28 and a high of $32.29 before closing the day at $31.19, an increase of 4.52%.

Sabre upsizes

Sabre priced an upsized $300 million of five-year exchangeable notes after the market close on Monday at par with a coupon of 4% and an initial exchange premium of 32.5%, according to a company news release.

Pricing came richer than initial price talk for a coupon of 4.5% to 5% and an initial exchange premium of 22.5% to 27.5%, according to a market source.

The greenshoe was also upsized to $45 million.

The initial size of the offering was $250 million with a greenshoe of $37.5 million.

The notes dominated activity in the secondary space.

They traded as high as 107 shortly after the opening bell but came in alongside stock as the session progressed.

The notes were changing hands between 104 to 105 about one hour into the session. They again climbed to 106 heading into the market close.

They were also expanded 3.25 points dollar-neutral, a market source said.

Sabre stock traded as high as $6.44 and a low of $5.83 before closing the day at $6.07, an increase of 2.19%.

Mentioned in this article:

Burlington Stores Inc. NYSE: BURL

Coherus Biosciences, Inc. Nasdaq: CHRS

Dick’s Sporting Goods, Inc. NYSE: DKS

Natera Inc. Nasdaq: NTRA

Sabre Corp. Nasdaq: SABR

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