i3 Verticals exchangeables expand on debut; Barclays prices; Revance up; Tesla expands

By Abigail W. Adams

Portland, Me., Feb. 13 – After a relatively active week, the convertibles primary market was quiet on Thursday with the deals to price after the market close on Wednesday the final deals of the week.

i3 Verticals LLC priced an upsized $120 million of five-year exchangeable notes and Barclays Bank plc priced $250 million cash-settled equity linked notes tied to Visa Inc. after the market close on Wednesday.

i3 Verticals’ notes saw a large dollar-neutral expansion on their market debut, which has been a theme from the deals to price over the past week.

The deals from earlier in the week also continued to improve in the secondary space.

While trading activity tempered, Revance Therapeutics Inc.’s 1.75% convertible notes due 2027 gained on an outright basis and Collegium Pharmaceutical Inc.’s 2.625% convertible notes due 2026 continued to add dollar-neutral.

Outside of the new paper, Tesla Inc. was again making headlines with news of a $2 billion secondary offering.

The B tranche was the most active of the convertible notes and was expanding as stock gained on the news.

i3 Verticals expands

i3 Verticals priced an upsized $120 million five-year exchangeable notes after the market close on Wednesday at the midpoint of talk with a coupon of 1% and an initial conversion premium of 30%.

Price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The notes are exchangeable for i3 Verticals Inc. common shares.

The new notes saw a large dollar-neutral expansion in the secondary space.

i3 Verticals’ 1% exchangeable notes were seen at 102.5 bid, 103.5 offered with stock flat early Thursday, a market source said.

They rose to a 105 handle as stock popped heading into the afternoon.

The notes were expanded 3.25 points on a dollar-neutral basis, a market source said.

i3 Verticals stock traded to a high of $33.00 and a low of $30.75 before closing the day at $32.25, an increase of 2.58%.

Barclays synthetic

Barclays Bank priced $250 million of cash-settled equity linked notes tied to Visa after the market close on Wednesday with a coupon of 0%, an initial conversion premium of 20% and a reoffer price of 104, according to a market source and a 424B5 filing with the Securities and Exchange Commission.

Pricing came in line with talk for a coupon of 0%, an initial conversion premium of 20% and at the cheap end of talk for a reoffer price of 104 to 104.5, according to a market source.

The deal was heard to be driven to the market by reverse inquiry from a European account.

The deal was met with strong long-only demand, a market source said.

Barclays’ latest synthetic is the fourth cash-settled equity-linked note to price since January.

New paper

The deals that priced over the past week continued to outperform in the secondary market.

While trading activity tempered, Revance’s 1.75% convertible notes due 2027 continued to gain on an outright basis.

The notes rose to a 104 handle and were changing hands at 104.625 in the late afternoon with stock on the rise.

However, the notes were moving in line on a dollar-neutral basis, a market source said.

Revance stock traded to a low of $23.46 and a high of $25.21 before closing the day at $24.71, an increase of 2.11%.

The notes closed Wednesday around 102.5.

Collegium Pharmaceutical’s 2.625% convertible notes due 2026 continued to gain dollar-neutral.

The notes were changing hands at 110.875 in the late afternoon.

They were expanded another 0.375 point dollar-neutral.

Collegium stock traded to a low of $23.42 and a high of $24.56 before closing the day at $24.01, a decrease of 0.62%.

The 2.625% notes traded up to 110.5 on Wednesday. They have expanded more than 5 points since hitting the secondary space on Tuesday.

Tesla’s equity raise

Tesla returned to focus on Thursday following news the electric car manufacturer was prepping a $2 billion to $2.3 billion common stock offering.

The B tranche, or 1.25% convertible notes due 2021, were the most active of the outstanding issues following the news.

The notes, which trade on a 95% to 100% delta, traded as low as 214 but stood poised to close the day north of 225.

They were expanded about 0.25 point dollar-neutral, a market source said.

While less active, the C tranche, or 2.375% convertible notes due 2022, stood poised to close the day at 251.

The D tranche, or 2% convertible notes due 2024, were set to close the day just shy of 270.

Tesla stock traded to a low of $735.00 and a high of $818.00 before closing the day at $804.00, an increase of 4.78%.

Stock was posting gains after the electric car manufacturer said it plans to raise $2 billion to $2.3 billion in a secondary stock offering.

While CEO Elon Musk previously stated a capital raise would not be needed, the company was most likely taking advantage of the stock’s massive bull run.

An equity raise is usually better for a company’s capital structure than issuing more debt, a market source said.

Tesla’s equity-sensitive convertible notes may take a temporary hit when the offering prices, a market source said.

However, the capital raise will ultimately be a good thing because it will add more money to the company’s coffers and improve its credit profile, the source said.

Mentioned in this article:

Collegium Pharmaceutical Inc. Nasdaq: COLL

i3 Verticals Inc. Nasdaq: IIIV

Revance Therapeutics Inc. Nasdaq: RVNC

Tesla Inc. Nasdaq: TSLA

Visa Inc. NYSE: V

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