Morning Commentary: Super Micro, Sunrun, Lyft convertible notes on deck; Parsons jumps

By Abigail W. Adams

Portland, Me., Feb. 22 – The convertibles primary market unleashed a torrent of deals after a more than two-week hiatus with the holiday-truncated week set to be the highest volume week for issuance since September 2023.

Super Micro Computer Inc. plans to price $1.5 billion of five-year convertible notes, Lyft Inc. plans to price $400 million of five-year convertible notes and Sunrun Inc. plans to sell $475 million of six-year convertible notes after the market close.

In an overnight offering, Parsons Corp. priced $700 million of five-year convertible notes after the market close on Wednesday.

As expected, refinancings were the driving force behind three of the four deals that launched on Wednesday.

However, Super Micro’s offering was new money entering the market, a rare opportunistic capital raise from a high-quality credit commanding pricing terms reminiscent of 2020.

Super Micro on tap

In its debut convertible notes offering, Super Micro plans to price $1.5 billion of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 35% to 40%.

The deal was heard to be in the market with assumptions of 175 basis points over SOFR and a 45% vol.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk.

The deal did not look as cheap as some of the other deals in the market with the low coupon and high conversion premium increasingly rare.

“But look at the stock,” a source said.

The offering was expected to play to strong demand with the market hungry for new paper, especially from a high-quality credit with a high vol. stock.

The company’s stock traded up to a 52-week high of $1,077.87 about two weeks ago before falling 30%.

Super Micro’s stock again exploded in the wake of Nvidia’s earnings and was trading at $882.43, an increase of 20.19%, shortly before 11 a.m. ET.

Lyft refinances

Lyft plans to price $400 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.625% to 1.125% and an initial conversion premium of 27.5% to 32.5%.

The deal was in the market with assumptions of 350 bps over SOFR and a 45% vol.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk, a source said.

The deal looked good and was expected to play to strong demand with the offering coming as a refinancing.

The company will repurchase a portion of its 1.5% convertible notes due 2025 in privately negotiated transactions.

Sunrun eyed

Sunrun plans to price $475 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 800 bps over SOFR and a 45% vol.

Using those assumptions, the deal looked about 3.5 points cheap at the midpoint of talk.

The deal looked cheap and there was little doubt it would get done with the offering a refinancing.

Sunrun will repurchase a portion of its 0% convertible notes due 2026 in privately negotiated transactions.

However, investors are wary of the credit and the sector.

Some sources felt underwriters were aggressive with the credit spread, which should be wider.

“That sector has a lot of issues,” a source said.

Parsons jumps on debut

Parsons priced $700 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 2.625% and an initial conversion premium of 25%.

Pricing came in line with talk for a fixed coupon of 2.625% and a fixed conversion premium of 25%.

While the overnight refinancing deal was largely spoken for at launch, the deal was heard to be in the market with assumptions of 200 bps over SOFR and a 23% vol.

The notes jumped on their aftermarket debut.

They were marked at 102.5 bid, 103.5 offered pre-open and continued to rise alongside stock after the opening bell.

They traded as high as 105 early in the session.

Parsons’ stock was trading at $78.15, an increase of 3.8%, shortly before 11 a.m. ET.

Unlike other overnights that have destroyed the company’s stock, Parsons’ stock was posting gains early Thursday with the repurchasing of the company’s outstanding notes stabilizing the stock price.

The company repurchased $228.1 million in principal of its 0.25% convertible notes due 2025 for $391.8 million in privately negotiated transactions.

The company will also purchase an additional $56.5 million in principal of the 0.25% convertible notes at a purchase price based on the VWAP of stock over the determined period.

The deal “netted out the delta difference between the two,” a source said.

Parsons’ in-the-money 0.25% convertible notes due 2025 trade on a 99% delta, and the new issue was put on a 60% delta.

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