Morning Commentary: Nio, DocuSign convertible offerings eyed; Box trades up on debut

By Abigail W. Adams

Portland, Me., Jan. 12 – New convertible notes were in focus on Tuesday with two deals set to price after the market close and one more making its aftermarket debut.

Nio Inc. plans to price $1.3 billion of convertible notes in two tranches and DocuSign Inc. plans to price $500 million three-year convertible notes after the market close on Tuesday.

Both offerings looked cheap based on underwriters’ assumptions and were accompanied by privately negotiated buybacks of outstanding notes.

Meanwhile, Box Inc.’s newly priced convertible notes hit the aftermarket and traded up on debut.

Nio again

Nio plans to sell $1.3 billion of convertible notes in two tranches after the market close on Tuesday.

The deal includes a $650 million tranche of five-year notes with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 45% to 50%.

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

Using those assumptions, the tranche looked 3.27 points cheap at the midpoint of talk.

The deal also includes a $650 million tranche of six-year notes with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 45% to 50%.

Assumptions for the tranche were 475 bps over Libor and a 45% vol., which looked about 3 points cheap at the midpoint of talk.

Concurrently with the offering, the company will enter into privately negotiated transactions with holders of its 4.5% convertible notes due 2024 to exchange a portion of the notes for American Depositary Shares.

The 4.5% notes were Nio’s debut appearance in the convertibles market – the Shanghai-based electric car manufacturer priced a $750 million issue of the notes in January 2019.

The notes saw wild price movements over the past two years.

At one point in time, the notes were deeply distressed. They traded as low as 24 in mid-2019 with the company on the verge of bankruptcy.

However, Nio staged a remarkable rebound and the 4.5% notes closed Monday at 666, according to Trace data.

DocuSign on tap

DocuSign plans to price $500 million three-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 57.5% to 62.5%.

The deal was being marketed with assumptions of 225 bps over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked 1.73 points cheap at the midpoint of talk, a source said.

The three-year maturity on the notes was unusual, a source said.

Proceeds will be used, in part, to fund the repurchase of its 0.5% convertible notes due 2023 in privately negotiated transactions.

Box trades up on debut

Box sold an upsized $315 million of five-year convertible notes after the market close on Monday at par with a coupon of 0% and an initial conversion premium of 45%.

Pricing came in line with tightened talk for a fixed coupon of 0% and at the rich end of talk for an initial conversion premium of 42.5% to 45%, according to a market source.

Initial price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 35% to 40%.

The new paper was trading up on debut.

The 0% notes traded as high as 103.25 early in the session.

They were changing hands at 101.25 with stock off early in the session.

Box’s stock was $17.61, a decrease of 1.01%, shortly before 11 a.m. ET.

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