Accolade convertibles on tap; MP Materials, ViacomCBS eyed; $2.35 billion notes price

By Abigail W. Adams

Portland, Me., March 23 – New convertibles paper was in focus on Tuesday with $2.35 billion in six deals making their aftermarket debut, two deals totaling $1.5 billion set to price after the market close and one $250 million deal set to price on Wednesday.

Accolade Inc. plans to sell $250 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%, according to a market source.

MP Materials Corp. plans to price $500 million of five-year green convertible notes and ViacomCBS Inc. plans to sell $1 billion par-of-$100 three-year series A mandatory convertible preferred stock after the market close on Tuesday.

Both offerings looked cheap, sources said.

However, the convertibles market was beginning to show signs of fatigue with the influx of new paper over the past month.

On Monday alone, Redfin Corp. priced $500 million of six-year convertible notes; JetBlue Airways Corp. priced $650 million of five-year convertible notes; Groupon Inc. sold $200 million of five-year convertible notes; Macom Technology Solutions Holdings Inc. priced $400 million of five-year convertible notes; TripAdvisor Inc. brought $300 million of five-year convertible notes and Liberty TripAdvisor Holdings, Inc. priced $300 million of exchangeable debentures due 2051.

In stark contrast to the beginning of the year, where tightening of price talk was becoming the norm, the deals to price on Monday came at the midpoint or wide end of talk.

While pricing was beginning to cheapen and the market was beginning to become saturated with new paper, “for the right deals, the market’s still there,” a source said.

And the heavy volume of new issuance is expected to continue, sources said.

The new paper hit the secondary space on another heavy day for equities with equity benchmarks again in the red as Treasury secretary Janet Yellen and Federal Reserve chairman Jerome Powell testified before congress.

The secondary performance was mixed with some trading well below par, some flat and some posting gains on an outright and dollar-neutral basis.

MP Materials on tap

MP Materials plans to price $500 million of five-year green convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.25% and an initial conversion premium of 25% to 30%, according to a market source.

Underwriters were marketing the deal with assumptions of 450 basis points over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked 3.78 points cheap at the midpoint of talk.

While some sources felt the credit spread was tight, the deal looked OK and is expected to do well, a source said.

Concurrently, certain shareholders are pricing a secondary offering of 8 million shares.

MP Materials’ stock tanked on the heels of the convertible and secondary offerings.

Stock closed Tuesday at $36.90, a decrease of 18.27%.

ViacomCBS looks cheap

ViacomCBS plans to price $1 billion par-of-$100 three-year series A mandatory convertible preferred stock after the market close on Tuesday with price talk for a dividend of 5.25% to 5.75% and an initial conversion premium of 17.5% to 22.5%.

The deal looked about 2 points cheap, a source said.

Concurrently, the company plans to price a secondary offering of $2 billion of its class B common stock.

Stock was also trading off on the heels of the offerings and closed the day at $91.25, a decrease of 9.06%.

Redfin flat outright

Redfin priced $500 million of six-year convertible notes after the market close on Monday at par at the cheap end of talk with a coupon of 0.5% and an initial conversion premium of 35%.

Price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 35% to 40%, according to a market source.

The notes traded as low as 99.5 and as high as 101.625 shortly after the opening bell.

They were wrapped around par shortly before 11 a.m. ET.

The notes remained at par heading into the afternoon.

While flat outright, the 0.5% notes expanded 1.5 points dollar-neutral, a source said.

Redfin’s stock traded to a high of $68.50 and a low of $65.65 before closing the day at $66.28, a decrease of 4.33%.

JetBlue rises

JetBlue sold $650 million of five-year convertible notes after the market close on Monday at par at the midpoint of talk with a coupon of 0.5% and an initial conversion premium of 35%.

Price talk was for a coupon of 0.25% to 0.75% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The notes traded in a wide range on an outright basis early in the session.

The 0.5% notes traded as low as 99.75 and as high as 104 early in the session.

However, they leveled off around 102 with stock flat as the session progressed.

The notes expanded 2 points dollar-neutral.

JetBlue’s stock traded to a high of $19.87 and a low of $18.92 before closing the day at $19.25, an increase of 0.26%.

Groupon below par

Groupon brought $200 million of five-year convertible notes after the market close on Monday at par with a coupon of 1.125% and an initial conversion premium of 30%.

Pricing came at the cheap end of talk for a coupon of 0.625% to 1.125% and at the midpoint of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The notes sank on an outright basis.

They closed the day at 97.5, according to a market source.

However, they were seen up 0.5 point dollar-neutral in the early afternoon.

Groupon’s stock traded to a high of $51.82 and a low of $47.88 before closing the day at $47.98, a decrease of 8.44%.

The TripAdvisors

TripAdvisor sold $300 million of five-year convertible notes after the market close on Monday at par with a coupon of 0.25% and an initial conversion premium of 37.5%.

Pricing came at the cheap end of talk for a coupon of 0% to 0.25% and at the midpoint of talk for an initial conversion premium of 35% to 40%, according to a market source.

The notes traded as low as 99.875, which was most likely the result of flippers exiting the deal, a source said.

However, the majority of prints were between par and 101.

The notes expanded about 1 point dollar-neutral, a source said.

In a concurrent offering, Liberty TripAdvisor priced $300 million of exchangeable debentures due 2051 after the market close on Monday at par with a coupon of 0.5% and an initial exchange premium of 30%.

Pricing came at the cheap end of talk for a coupon of 0.25% to 0.5% and an initial exchange premium of 30% to 35%, according to a market source.

The notes were flat dollar-neutral, a source said.

TripAdvisor’s stock traded to a high of $53.53 and a low of $48.92 before closing the day at $49.39, a decrease of 7.99%.

Macom gains

Macom Technology sold $400 million of five-year convertible notes after the market close on Monday at par with a coupon of 0.25% and an initial conversion premium of 40%.

Pricing came at the cheap end of talk for a coupon of 0% to 0.25% and at the midpoint of talk for an initial conversion premium of 37.5% to 42.5%, according to a market source.

The notes were making gains on both an outright and dollar-neutral basis.

They were changing hands in a tight range between 100.25 and 100.5 early in the session.

The notes continued to gain as the session progressed and were wrapped around 101 in the late afternoon.

The notes were up 0.5 to 1 point dollar-neutral during Tuesday’s session, sources said.

Macom’s stock traded to a high of $60.06 and a low of $56.12 before closing the day at $57.03, a decrease of 2.78%.

Mentioned in this article:

Groupon Inc. Nasdaq: GRPN

JetBlue Airways Corp. Nasdaq: JBLU

Liberty TripAdvisor Holdings, Inc. Nasdaq: TRIP

Macom Technology Solutions Holdings Inc. Nasdaq: MTSI

MP Materials Corp. Nasdaq: MP

Redfin Corp. Nasdaq: RDFN

TripAdvisor Inc. Nasdaq: TRIP

ViacomCBS Inc. Nasdaq: VIAC

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