Liberty Latin America, Uniti hit the market, expand; Qudian, Change Healthcare on tap

By Abigail W. Adams

Portland, Me., June 26 – While new deal activity continues to lag 2018, the convertibles primary market stood poised to close out the second quarter on strong footing.

Two deals totaling $650 million priced prior to the market open on Wednesday, and two more deals totaling $500 million were set to price after the market close.

Uniti Group Inc. priced $300 million of five-year exchangeable notes and Liberty Latin America Ltd. priced $350 million of five-year convertible notes prior to the market open.

The new paper kickstarted activity in the secondary space and was expanding on debut, sources said.

The new deal activity will continue into Thursday’s session.

Change Healthcare Inc.’s $250 million offering of three-year par of $50 tangible equity units will price after the market close on Wednesday.

The deal was in demand during bookbuilding and multiple times oversubscribed.

Qudian Inc. is also slated to price its $250 million offering of seven-year convertible notes after the market close.

The deal looked cheap, sources said.

Uniti expands

Uniti Group priced $300 million of five-year exchangeable notes prior to the market open on Wednesday at par with a coupon of 4% and an initial exchange premium of 32.5%.

Pricing came at the rich end of talk for a coupon of 4% to 4.5% and an initial exchange premium of 27.5% to 32.5%.

Some sources were apprehensive about the deal with Uniti’s largest customer, Windstream, filing for bankruptcy in February.

However, there was strong demand for the deal, which was multiple times oversubscribed, a source said.

The deal attracted a strong contingency of cross-over investors, many who were familiar with Uniti’s story and understood the risks and opportunities the deal had to offer.

And the deal had some attractive results, another source said.

It enabled the company to raise the proceeds necessary to amend and downsize its revolving credit facility and raise capital for its previously announced acquisition of Bluebird Network, LLC.

It also provided investors with a good coupon and premium spread.

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

The 4% notes traded up to 101.75 bid, 102 offered with stock down early in the session.

They were wrapped around 102 headed into the afternoon.

The notes were expanded between 1.5 points and 2.25 points dollar-neutral, a market source said.

The bonds saw more than $78 million in reported volume in the late afternoon.

Uniti stock traded as low as $9.08 during Wednesday’s session but closed the day at $9.42, an increase of 0.43%.

The deal highlighted strong momentum in the convertibles market and its attractiveness as a method to raise capital for some off-the-run situations, a source said.

Liberty wall-crossed

Liberty Latin America priced $350 million of five-year convertible notes prior to the market open on Wednesday with a coupon of 2% and an initial conversion premium of 22.5%.

Pricing came at the cheap end of talk for a coupon of 1.5% to 2% and an initial conversion premium of 22.5% to 27.5%.

“It was decently priced for an overnight,” a market source said.

The deal, which priced shortly after it was announced, was heard to be wall-crossed with most of the issue spoken for before launching.

It was holding up well as stock took a hit, a market source said.

The new notes were largely hovering at par early in the session although there were some prints as low as 99.625.

They traded up to 100.5 by the mid-afternoon.

The notes expanded about 1.25 points dollar-neutral, a source said.

The notes were in focus in the secondary space with more than $87 million in reported volume by the late afternoon.

The notes are convertible into Liberty Latin America’s class C common stock.

The class C stock traded as low as $16.75 during Wednesday’s session but closed the day at $17.20, a decrease of 5.23%.

The success of the deal was no surprise with Liberty and its subsidiaries serial issuers of convertible notes with a large following.

Qudian looks cheap

Qudian is the latest China-based company to come forward with a convertible notes offering.

The Xiamen, China-based online consumer credit provider plans to price $250 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 25% to 30%, according to a market source.

Using a credit spread 600 bps over Libor and a 40% vol., the deal modeled about 4.84 points cheap, a market source said.

However, other sources pegged the deal with a much wider credit spread, which would bring the deal down to fair value.

There are many investors that stay away from China-based companies with no distressed buyers for the paper if it falls into distressed territory.

While some sources felt the company deserved a wider credit spread, other sources pointed out that the company does have growing revenue and earnings per share.

Change oversubscribed

Change Healthcare is expected to price its $250 million offering of three-year par of $50 tangible equity units after the market close on Wednesday.

Price talk is for a dividend of 5.75% to 6.25% and a threshold appreciation premium of 17.5% to 22.5%.

The deal was heard to be in the market with a credit spread of 400 bps over Libor and a 25% vol., which sources pegged as 2.25 points cheap at the midpoint of talk.

The tangible equity units were multiple times oversubscribed during bookbuilding, a source said.

They were expected to come at the midpoint of talk. While there was discussion about upsizing the deal, it will most likely remain at its initial size.

The deal is pricing concurrently with its IPO, which is expected to come slightly downsized.

While the deal is expected to do well, it will be difficult to hedge given the fact that it’s pricing alongside its IPO.

Mentioned in this article:

Liberty Latin America Nasdaq: LILAK

Qudian Inc. NYSE: QD

Uniti Group Inc. Nasdaq: UNIT

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.