Morning Commentary: DISH megadeal, iQIYI, Atlas Corp. on deck; Vail hits aftermarket

By Abigail W. Adams

Portland, Me., Dec. 16 – The convertibles primary market unleashed a torrent of new offerings on the last full trading week of the year with three deals totaling $2.975 billion set to price after the market close on Wednesday and one new deal making its aftermarket debut.

In one of the largest offerings of the year, DISH Network Corp. plans to price $2 billion of five-year convertible notes after the market close on Wednesday.

The deal modeled cheap and had good early momentum behind it, sources said.

iQIYI Inc. also plans to price $800 million of six-year convertible notes and Atlas Corp. plans to sell $175 million of five-year exchangeable notes after the market close on Wednesday.

While iQIYI’s offering looked cheap, the name was controversial with the company recently the subject of an SEC investigation.

Atlas’ offering also looked cheap. However, the deal was wall-crossed and already mostly spoken for.

As market players focused on the new deals in the pipeline, new paper from Vail Resorts Inc. made their aftermarket debut.

The notes were active and trading up on debut.

DISH in focus

In one of the largest offerings of the year, DISH plans to price $2 billion of five-year convertible notes after the market close on Wednesday with price talk for a fixed coupon of 0% and an initial conversion premium of 30% to 40%.

The deal was in the market with assumptions of 500 basis points over Libor and a 45% vol., a source said.

Using those assumptions, the deal looked 0.81 point cheap at the midpoint of talk.

The deal had good early momentum behind it, a source said.

iQIYI on deck

iQIYI plans to price $800 million of convertible notes due Dec. 15, 2026 after the market close on Wednesday with price talk for a coupon of 3.75% to 4.25% and an initial conversion premium of 25% to 30%, according to a market source.

Concurrently, the company is pricing a secondary offering of 40 million American Depositary Shares.

While it was unclear what underwriters were using, one source pegged assumptions at 1,500 bps over Libor and a 40% vol.

Using those assumptions, the deal looked about 2 points cheap, a source said.

The assumptions were based on the trading level of the company’s outstanding notes.

The Beijing-based online entertainment service provider is a serial issuer of convertible notes with its outstanding notes volatile over the past year.

The company’s ADSs and convertible notes were under pressure following a short-seller report and an SEC investigation into the company’s financials in August.

The notes were also in focus and tanked on an outright basis following the company’s third-quarter earnings report in November.

Atlas wall-crossed

Atlas plans to price $175 million of five-year exchangeable notes after the market close on Wednesday with price talk for a coupon of 3.25% to 3.75% and an initial exchange premium of 27.5% to 32.5%, according to a market source.

The notes will be issued by subsidiary Seaspan Corp. and exchangeable for Atlas shares.

The notes were marketed with assumptions of 600 bps over Libor and a 40% vol., a source said.

Using those assumptions, the deal looked 6.5 points cheap at the midpoint of talk.

Another source pegged the deal almost 7.5 points cheap.

However, the offering was wall-crossed with the small issue largely spoken for at launch.

Vail trades up

Vail Resorts priced a $500 million offering of five-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 47.5%.

Pricing came at the rich end of initial talk for a coupon of 0% to 0.5% and richer than initial talk for an initial conversion premium of 40% to 45%.

The new paper was active in the secondary space and trading up on debut.

The 0% notes were changing hands in a tight range between 101.875 and 102.25, according to a market source.

Vail’s stock traded to a high of $287.28 shortly after the opening bell but came in to trade at $279.86 shortly before 11 a.m. ET.

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