Morning Commentary: Liberty Media exchangeables, CSG eyed; Rapid7 gains on debut

By Abigail W. Adams

Portland, Me., Sept. 6 – New convertibles paper was in focus on Wednesday with two deals slated to price post-close and one more making its aftermarket debut.

Liberty Media Corp. plans to price $900 million of exchangeable senior debentures due 2053 for Live Nation Entertainment stock and CSG Systems International Inc. plans to price $350 million of five-year convertible notes after the market close on Wednesday.

Both offerings modeled cheap although sources saw CSG as the more attractive option.

While market players eyed the new deals in the works, new paper from Rapid7 Inc. made its aftermarket debut.

The new paper hit the secondary space as equity markets continued to give back their gains from the previous week.

The Dow Jones industrial average was down 178 points, or 0.51%, the S&P 500 index was down 0.76%, the Nasdaq Composite index was down 1.01% and the Russell 2000 index was down 0.08% shortly before 11 a.m. ET.

However, the new paper from Rapid7 was putting in a solid aftermarket performance with some nominal outright and dollar-neutral gains.

Rapid7 taps market

Rapid7 priced an upsized $270 million offering of convertible notes due March 15, 2029 after the market close on Tuesday at par at the rich end of talk with a coupon of 1.25% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 1.25% to 1.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The greenshoe was also upsized to $40 million.

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

The deal played to strong demand with the offering modeling cheap and the deal coming as a refinancing.

Proceeds were used to repurchase $184 million in principal of the company’s 2.25% convertible notes due 2025 for $201.5 million.

The new paper was putting in a solid aftermarket performance although “they didn’t leave too much on the table,” with the upsizing and tight pricing, a source said.

The 1.25% notes were marked at 100.5 bid, 101 offered with stock up slightly early in the session.

The notes expanded about 0.5 point dollar-neutral.

Rapid7’s stock was changing hands at $49.35, an increase of 1.14%, shortly before 11 a.m. ET.

CSG eyed

CSG Systems 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%.

The deal was heard to be in the market with assumptions of 300 bps over SOFR and a 28% vol., according to a market source.

Using those assumptions, the deal looked about 3.1 points cheap at the midpoint of talk.

The deal looked attractive with a nice coupon, a good borrow on the company’s stock and a decent name, a source said.

While the majority of recent deals to clear the primary have come as refinancings, CSG’s deal is new money contributing to the net expansion of the convertibles market.

The fintech is not new to the convertible market but has not priced a deal since 2016, according to the Prospect News database.

Liberty Media ahead

Liberty Media 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%.

The deal was heard to be in the market with assumptions of 300 bps over SOFR and a 33% vol.

Using those assumptions, the deal looked about 2.2 points cheap at the midpoint of talk, a source said.

The latest ‘John Malone special,’ a moniker market participants have given to the serial convertible issuance from Liberty Media, is coming as a refinancing.

Proceeds, together with cash on hand, will be used to make repurchases of Liberty Media’s 0.5% exchangeable debentures due 2050 in privately negotiated transactions or to settle exchanges or redeem the notes, which become freely callable and are putable on Sept. 1, 2024.

While there was little doubt about the deal’s ability to get done with the refinancing helping to drive demand, the offering was met with limited enthusiasm due to the amount of Liberty Media and Live Nation paper already available.

“It’s not the most exciting name,” a source said.

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