Bilibili on tap; iQIYI convertibles in focus; RH active; Chinese-based convertibles up

By Abigail W. Adams

Portland, Me., April 1 – China-based companies were the theme of both the primary and secondary convertible market on Monday.

Bilibili Inc., a Shanghai-based online entertainment company, plans to price $300 million in seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.375% to 1.875% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Morgan Stanley & Co. LLC, Credit Suisse Securities LLC, and J.P. Morgan Securities LLC are active bookrunners for the Rule 144A and Regulation S offering, which carries a greenshoe of $45 million.

Concurrent with the convertible notes offering, the company plans to price 10,554,000 American depositary shares, each which represent one ordinary share in the company and certain shareholders are offering an additional 6,526,487 ADSs.

Meanwhile, the convertibles secondary market launched the week on firm footing with manufacturing data from China bolstering stocks and Treasury yields on the rise after reaching their lowest point in recent history the previous week.

The convertibles market was steadily bid up as equities soared on Monday. “It’s a liftathon,” a market source said.

iQIYI Inc.’s recently priced 2% convertible notes due 2025 and outstanding 3.75% convertible notes due 2023 remained in focus with the notes continuing their upward momentum.

The convertible bonds of China-based companies were in general improved on Monday.

Momo Inc.’s 1.25% convertible notes due 2025, Huazhu Hotels Group’s 0.375% convertible notes due 2022 and Nio Inc.’s 4.5% convertible notes due 2024 were all posting gains during Monday’s session.

RH’s, formerly Restoration Hardware Holdings Inc., 0% convertible notes due June 15 also firmed on Monday after a slashed outlook sent the company’s stock tumbling last Friday.

However, the notes are entering into their averaging period placing the bonds in an awkward position, a market source said.

iQIYI gains continue

iQIYI’s recently priced 2% convertible notes due 2025 remained among the most actively traded bonds in the secondary space and continued to see gains on Monday.

The 2% notes from the Beijing-based online entertainment service provider rose another 3 points outright.

They were changing hands north of 106 early in Monday’s session and continued to climb to 107 by the late afternoon.

The notes were expanded another 0.5 point dollar-neutral, a market source said.

More than $30 million of the bonds were on the tape by the late afternoon.

iQIYI’s 3.75% convertible notes due 2023 were also posting gains. The 3.75% convertible notes rose 3.5 points outright to 121.625.

They were also up about 0.5 point dollar-neutral.

iQIYI’s American Depositary Shares closed Monday at $24.79, an increase of 3.64%.

iQIYI’s 2% convertible notes have taken off since pricing with the notes making large gains on both an outright and dollar-neutral basis.

The notes continued to climb alongside most other convertible bonds from China-based corporations on Monday.

China converts in focus

The convertible bonds of China-based companies were active on Monday and posting gains with the notes lifted by promising economic data from China.

Momo’s 1.25% convertible notes due 2025, Huazhu Hotels’ 0.375% convertible notes due 2023 and Nio’s 4.5% convertible notes due 2024 were improved by at least 0.5 point dollar-neutral, a market source said.

Momo’s 1.25% convertible notes traded up more than 2 points outright to 99 by late Monday afternoon.

More than $11 million of the bonds were on the tape.

Momo’s ADSs closed Monday at $40.81, up 6.72%.

Huazhu Hotels’ 0.375% convertible notes rose 4 points outright to around 119. About $7 million of the bonds were on the tape by the late afternoon.

Huazhu Hotels’ ADSs closed Monday at $44.87, an increase of 6.48%.

Nio’s 4.5% convertible notes due 2024 rose about 1.5 points outright to 87.

Nio’s ADSs closed Monday at $5.21, an increase of 2.16%.

While previously disappointing economic data from China fueled fears about a global slowdown that has weighed on equities, recently released data showed China’s manufacturing sector had grown in March.

RH active

RH’s soon-to-mature 0% convertible notes due June 15 again saw high-volume activity on Monday with the notes firming although their short duration placed them in an odd position, according to a market source.

The 0% notes were changing hands around 100.5 on Monday. They were improved about 0.375 to 0.5 point dollar-neutral, a market source said.

More than $20 million of the bonds were on the tape by the late afternoon.

RH stock traded as high as $105.5 during Monday’s session but closed the day at $103.36, an increase of 0.4%.

The 0% notes due June 15 are about to enter into the averaging period prior to their retirement and people have started to buy back shares to cover the hedged portion of the shares underlying the convertible bonds.

The bonds are currently in “inbetweenland,” a market source said, with the value of their optionality disappearing.

Mentioned in this article:

Bilibili Inc.

Nasdaq: BILI

Huazhu Hotels Group

Nasdaq: HTHT

iQIYI Inc.

Nasdaq: IQ

Momo Inc.

Nasdaq: MOMO

Nio Inc.

NYSE: NIO

RH

NYSE: RH

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