Liberty Media, CSG on tap; Rapid7 convertible sees heavy demand; Hannon Armstrong jumps

By Abigail W. Adams

Portland, Me., Sept. 5 – The convertibles primary market unleashed the flood gates on Tuesday with one deal set to price after the market close and two more deals on deck for post-close Wednesday.

CSG Systems International Inc. plans to price $350 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 3.875% to 4.375% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Jefferies LLC, Wells Fargo Securities LLC and RBC Capital Markets LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $52.5 million.

Liberty Media Corp. plans to price $900 million of exchangeable senior debentures due 2053 for Live Nation Entertainment stock after the market close on Wednesday with price talk for a coupon of 2% to 2.5% and an initial exchange premium of 30% to 35%, according to a market source.

J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC and Citigroup Global Markets Inc. are bookrunners for the Rule 144A offering, which carries a greenshoe of $135 million.

Rapid7 Inc. plans to price a $250 million offering of convertible notes due March 15, 2029 after the market close on Tuesday.

The refinancing deal modeled cheap and played to heavy demand with talk tightening during book building.

The convertibles primary market is poised for a busy September after a late August lull in activity with the pipeline heard to be filling up as issuers rush to get deals done before entering into earnings season blackout.

While the primary market saw an active start to the week, the secondary space saw a slow return from the Labor Day weekend in the United States.

Equity indexes were in the red on Tuesday after making strong gains the previous week.

The Dow Jones industrial average closed the session down 196 points, or 0.56%, the S&P 500 index down 0.42%, the Nasdaq Composite index down 0.08% and the Russell 2000 index down 2.10%.

There was $39 million of convertibles trading on the tape about one hour into the session and $290 million on the tape about one hour before the market close with activity concentrated in investment-grade issues.

Hannon Armstrong Sustainable Infrastructure Capital Inc.’s 3.75% exchangeable notes due 2028 (Baa3) bounced to their highest outright level since pricing with stock rising more than 8% during Tuesday’s session.

Rapid7 eyed

Rapid7’s $250 million offering of convertible notes due March 15, 2029 played to strong demand during book building with the deal modeling cheap and the buyback of its outstanding notes limiting supply.

Talk tightened during book building to a coupon of 1.25% to 1.5% and an initial conversion premium of 32.5%, a source said.

Initial talk was for a coupon of 1.25% to 1.75% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 350 basis points over SOFR and a 42% vol.

Using those assumptions, the deal looked about 2.4 points cheap at the midpoint of initial talk, a source said.

The deal is coming as a refinancing with proceeds to be used to repurchase a portion of the company’s 2.25% convertible notes due 2025 in privately negotiated transactions.

In contrast to the general theme in the market of wider coupon ranges, the coupon range of Rapid7’s new offering is tighter than its 2025 notes, which the company priced in April 2020.

However, the pricing of Rapid7’s latest offering is largely in line with the valuation of its outstanding convertible notes, a source said.

The 2.25% notes have been trading around 107 and carry about a 30% premium, a source said.

The conversion premium for the deal on deck will be roughly the same as the 2.25% notes.

The tighter coupon range is largely the result of the increased optionality from the vol. that will come with the longer duration of the new notes, the source said.

Hannon Armstrong’s new high

Hannon Armstrong’s 3.75% exchangeable notes saw heavy volume on Tuesday with the notes jumping to their highest outright level since pricing in early August.

The 3.75% notes jumped 6 points outright with stock up more than 8%.

The notes were changing hands at 106.625 versus a stock price of $24.79 in the late afternoon, according to a market source.

There was $16 million in reported volume.

Hannon Armstrong’s stock traded to a high of $25.47 and a low of $24.51 before closing at $25.01, an increase of 8.22%.

Hannon Armstrong’s stock has seen large price swings over the past month.

Heavy selling in mid-August dragged stock down to a 52-week low of $19.46 and caused its convertible notes to tumble to a 95-handle

The convertible notes and stock have since recovered with the 3.75% notes closing last week on a par handle.

No topical news was linked to the large price movements.

Mentioned in this article:

CSG Systems International Inc. Nasdaq: CSGS

Hannon Armstrong Sustainable Infrastructure Capital Inc. NYSE: HASI

Live Nation Entertainment NYSE: LYV

Rapid7 Inc. Nasdaq: RPD

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