Okta, Zillow trade around par after pricing large deals; NextEra slips; new Encore adds

By Rebecca Melvin

New York, Sept. 5 – New convertible issues from Okta Inc. and Zillow Group Inc. traded around par at the open after the companies priced $1 billion and $1.1 billion in new paper, respectively, in a market that saw more than $3.6 billion hit secondary market trading on Thursday.

In addition to Okta and Zillow, NextEra Energy Partners, LP priced $1.5 billion three-year mandatory convertible equity units, and the units were seen “trading a bit lower just like all the new bonds that came,” a New York-based market source said.

The new NextEra units were heard at 48.50 bid, 48.60 offered with the common stock at $219.50.

The overnight bought deal priced at $50 par and was reoffered at 48.75, which was lower than price talk ahead of final terms being fixed.

Aerie Pharmaceuticals Inc. priced an upsized $275 million of 1.5% convertible senior notes due 2024 at par after the market close on Wednesday. Those bonds printed at 99.5 on Thursday morning.

Okta was the most active with fully one-third of total volume in the convertible market at 11:30 a.m. ET.

The Okta notes were last seen at 99.875. The two Zillow tranches were both very active and they each printed at 99.375.

Encore Capital Group Inc. was another issuer with a new deal hitting the secondary market on Thursday, but its $100 million of convertible senior notes due 2025 were quoted a little higher in the early going at 101.5 bid 102.5 offered out of the gate.

Looking ahead, Invitae Corp. was talking an upsized $300 million of five-year convertible senior notes to yield 1.75% to 2.25% with an initial conversion premium of 37.5% to 42.5%, according to a market source.

The Rule 144A deal carries a $30 million greenshoe and was being sold via J.P. Morgan Securities LLC as bookrunner.

The notes are non-callable for three years and then provisionally callable at a 130% price hurdle.

There are no puts.

Pricing was expected to occur after the market close on Thursday.

Invitae plans to use the net proceeds to repay, including a prepayment premium, the $75 million of notes outstanding under its 2018 note purchase agreement and for international expansion, infrastructure investment, working capital and other general corporate purposes. Invitae may also use a portion of the proceeds to acquire or invest in complementary businesses, assets or technologies.

The San Francisco-based company provides genetic testing.

Okta active

Okta’s newly priced 0.125% convertibles due 2025 traded last at 99.875. There was roughly $108 million of bonds that changed hands at late morning, according to Trace data.

Okta priced $1 billion of 0.125% six-year convertible notes after the market close on Wednesday at par with an initial conversion premium of 47.5%. Pricing came toward the rich end for the coupon talked at 0% to 0.5% and at the rich end for the premium, which was talked at 42.5% to 47.5%.

Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and JPMorgan were bookrunners for the Rule 144A deal, which has a $150 million greenshoe.

The notes are non-callable for three years and are provisionally callable thereafter at a price hurdle of 130%. There are no investor puts, and there is standard dividend and takeover protection.

In connection with the pricing, Okta entered into new capped call transactions. The proceeds will cover these costs as well as the repurchase of Okta’s existing 2023 notes and for general corporate purposes.

Okta is a San Francisco-based enterprise identity provider.

Zillow tranches trade off

The Zillow 0.75% convertibles due 2024 priced at par and traded down to 99.375 in the early going.

The Zillow 1.375% convertibles due 2026 also priced at par and traded down by the same amount.

Zillow shares closed down fractionally at $31.97, which was off 26 cents., or 0.8%

The Seattle-based real estate database company upsized the shorter-dated tranche by $100 million to $600 million in size. And the longer dated 2026 notes remained at $500 million in size.

Both priced with a 35% initial conversion premium.

Zillow intends to use a portion of the net proceeds from the offering to pay the cost of capped call transactions, with the remainder of proceeds for general corporate purposes, which may include working capital, sales and marketing activities, general and administrative matters and capital expenditures.

Additionally, Zillow may choose to expand its current business through acquisitions of, or investments in, other businesses, products or technologies, using cash or shares of common stock or capital stock. However, the company has no definitive agreements or commitments with respect to any such acquisitions or investments at this time.

Zillow is a Seattle-based online real estate database company.

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