PAR Technology convertibles eyed; Integra expands on debut; Tesla comes in; Snap expands

By Abigail W. Adams

Portland, Me., Feb. 5 – The convertibles secondary market was active on Tuesday with the first new paper of the week hitting the space.

Integra LifeSciences Holdings Corp.’s newly priced 0.5% convertible notes due 2025 dominated activity and made large gains on both an outright and dollar-neutral basis.

Meanwhile, Tesla Inc.’s convertible notes saw another active session with the bonds coming in as stock ended its massive bull run and sank more than 25% from recent intraday highs.

Snap Inc.’s 0.75% convertible notes due 2026 were active with the notes down outright but expanding on a dollar-neutral basis as stock sank post-earnings.

As the convertibles secondary market digested new paper, the primary market was prepping one new offering.

While the deal was small and the audience limited, PAR Technology Corp.’s $90 million offering of six-year convertible notes looked cheap, sources said.

PAR eyed

PAR Technology plans to price $90 million of six-year convertible notes after the market close on Wednesday with price talk for a coupon of 2.625% to 3.125% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be marketed with assumptions of 650 basis points over Libor and a 37% vol.

Using those assumptions, the deal modeled about 3.25 points cheap at the midpoint of talk, according to a market source.

Proceeds from the offering will be used, in part, to repurchase a portion of the company’s 4.5% convertible notes due 2024 in privately negotiated transactions.

Holders of the 4.5% notes will most likely be switching into the new offering, a source said.

PAR priced $80 million of the 4.5% notes in April 2019 when stock was $21.55.

PAR stock closed Wednesday at $32.43, a decrease of 4.53%.

The in-the-money convertible notes were last seen changing hands in November at 126, according to Trace data.

Integra expands

Integra LifeSciences priced $500 million of 5.5-year convertible notes after the market close on Tuesday with a coupon of 0.5% and an initial conversion premium of 30%.

Pricing came toward the rich end of talk for a coupon of 0.375% to 0.875% and at the midpoint of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The new paper dominated activity in the secondary space and saw a large dollar-neutral expansion.

The 0.5% notes were quoted at 101.5 bid before the market open and were changing hands north of 102 with stock up slightly about an hour into the session, sources said.

They climbed above 103 by the late afternoon.

The notes were expanded 1.5 points to 2 points dollar-neutral, sources said.

Integra stock traded as low as $56.81 and as high as $58.54 before closing the day at $57.82, an increase of 2.04%.

Some sources were surprised the deal performed as well as it did.

However, “people love this name,” another source said.

Integra is a serial issuer of convertible notes with the last one maturing in 2016.

While some sources pegged the deal slightly rich, “it doesn’t matter,” a source said. Integra is a large cap medical device technology company that people love, the source said.

European accounts were also active in the name and driving demand, a source said.

Tesla cracks

After a meteoric rise, Tesla’s convertible notes were coming in as stock cracked during Wednesday’s session.

Tesla’s 2% convertible notes due 2024 continued to see high volume activity and were second only to Integra in recorded volume.

The notes, which traded as high as 319 during Tuesday’s session, were changing hands at 250 in the late afternoon.

The notes were coming in dollar-neutral on an almost 100% hedge, a source said.

Tesla’s 2.375% convertible notes due 2022 traded down to 230 in the late afternoon. The 1.25% convertible notes due 2021 were down to 208.

Both tranches also topped triple par on Tuesday.

Tesla stock traded as high as $845.98 and as low as $704.11 before closing the day at $734.70, a decrease of 17.18%.

After shooting past $900 in intraday trading on Tuesday, stock cracked as the coronavirus finally caught up with the electric car manufacturer.

Tesla announced that deliveries scheduled for early February in China would be delayed due to the coronavirus outbreak.

Snap’s earnings

Snap’s 0.75% convertible notes due 2026 were active with the notes down outright but expanding on a dollar-neutral basis as stock sank post-earnings.

The 0.75% convertible notes dropped about 4.5 points outright to change hands between 109 and 109.5 with stock off about 8% early in the session.

The notes were expanded 0.5 point dollar-neutral on the move down, a source said.

The 0.75% notes continued to move lower as the day progressed.

The notes were changing hands at 107.5 in the late afternoon with stock down more than 13%.

Snap stock traded as high as $18.08 and as low as $16.11 before closing the day at $16.19, a decrease of 14.74%.

Stock was trading off after the social media company missed revenue expectations in its fourth-quarter earnings report.

Snap beat on the bottom line with earnings per share of 3 cents versus analyst expectations for earnings per share of 1 cent.

However, revenue was $561 million versus analyst expectations for revenue of $563 million.

Mentioned in this article:

Integra LifeSciences Holdings Corp. Nasdaq: IART

PAR Technology Corp. NYSE: PAR

Snap Inc. NYSE: SNAP

Tesla Inc. Nasdaq: TSLA

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