New Arch Resources convertibles open higher on debut; Twitter notes drop with stock

By Rebecca Melvin

New York, Oct. 30 – Arch Resources Inc.’s newly priced 5.25% convertibles jumped higher in trade early Friday after the St. Louis-based mining company priced an upsized $135 million of the five-year notes with a 25% initial conversion premium.

The paper was seen to have traded up 6 points on an outright basis and opened up 4 points on a dollar-neutral basis initially, a New York-based market source said. But sellers emerged by mid-morning, and the new paper slipped back to trade better by only 2.5 points on a dollar-neutral basis after that.

The underlying shares added back 2.3% after a big drop on Thursday.

Meanwhile, Twitter Inc.’s sister convertible bonds traded down as the underlying stock plunged 21% following the company’s earnings report, which showed slowing user growth.

In other news, Toronto-based mining company Argonaut Gold Inc. said that the greenshoe for its recently priced 4.625% convertible debentures was fully exercised, raising the deal size by $7.5 million to $57.5 million.

As previously reported, BMO Capital Markets Corp. and Scotiabank were joint bookrunners for the offering, which was marketed via short-form prospectus in each province in Canada except Quebec and via private placement in the United States.

The notes are non-callable until Nov. 30, 2023 and then subject to a 125% hurdle. The proceeds will be used for the advancement of the company’s gold mining project in Ontario, or the Magino project, and for general corporate purposes, according to the release.

In addition to the convertible debenture offering, the company expanded its revolving credit facility to $125 million to secure financing for the project.

Livongo Health Inc. announced that it entered into a first supplemental indenture to its $550 million of 0.875% convertible notes due June 1, 2025 on Friday in connection with the closing of its merger with Teladoc Health, Inc., according to an 8-K filing with the Securities and Exchange Commission.

As a result, the notes are no longer convertible into shares of common stock of Livongo, and instead each $1,000 principal amount is convertible into a number of units of reference property equal to the conversion rate then in effect, subject to the company’s right to settle any conversion in units of reference property, cash or any combination of cash and stock.

Livongo Health is a Mountain View, Calif.-based data-based health coaching program with products that help with the management of chronic diseases. Teladoc Health is a Purchase, N.Y.-based telemedicine and virtual health care company.

Arch notes expand

Ahead of pricing, sources said the Arch Resources deal looked cheap but was expected to have a limited audience. Nevertheless, the new notes moved up smartly and changed hands at as high as 106 at late morning on their debut, when the underlying shares were $30.99, which was not the stock’s peak of the day.

The notes priced with a 5.25% coupon and a 25% premium, which was the cheap end of coupon talk and at the middle of talk for the initial conversion premium.

Shares plunged 17% on Thursday after the new convertible offering was announced. Sources said the downturn was related to shareholder concern about dilution that can result when the bonds are converted. The shares have a 52-week high of $81.60.

The company also has existing straight debt. The nearer dated straight bonds – a 2026 note with a 4% coupon – traded off about 0.4 point in early trading, according to Trace data.

Twitter drops

Twitter’s 1% convertibles due 2021 were trading around par, which was off more than 2 points outright, according to Trace data at late morning. The Twitter 0.25% convertibles due 2024 were trading more actively than the near-dated paper and slipped below 110 compared to 120 bid, 121 offered on Thursday.

By late morning on Friday, Twitter’s shares had skidded $10.80, or 20.6%, to $41.65.

The social media company reported that it has 187 million daily users on average, compared to expectations for daily user volume of 195.6 million. The company’s third-quarter results overall were stronger than expected, however, with the healthy numbers said to be boosted by advertiser demand.

Mentioned in this article:

Arch Resources Inc. Nasdaq: ARCH

Agronaut Gold Inc. OTC: ARNGF

Livongo Health Inc. Nasdaq: LVGO

Twitter Inc. Nasdaq: TWTR

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