Qudian convertibles expand; Change equity units skyrocket; Liberty Media, Uniti improve

By Abigail W. Adams

Portland, Me., June 27 – New deal activity in the convertibles market continued on Thursday with $550 million in new paper pricing.

Change Healthcare Inc. sold $250 million, or 5 million units, of three-year par of $50 tangible equity units after the market close on Wednesday, and Qudian Inc. sold an upsized $300 million of seven-year convertible notes prior to the market open on Thursday.

The new paper dominated activity in the secondary space with Qudian and Change Healthcare trading up.

While activity surrounding Uniti Group Inc.’s newly priced 4% exchangeable notes due 2024 and Liberty Latin America Ltd.’s 2% convertible notes due 2024 tempered on Thursday, the notes remained active with both continuing to improve.

iQIYI Inc.’s 2% convertible notes due 2025 were active with the notes gaining outright as stock soared on optimism regarding a trade war truce at the G-20 summit.

Qudian in focus

Qudian priced an upsized $300 million of seven-year convertible notes prior to the market open on Thursday at par with a coupon of 1% and an initial conversion premium of 27.5%.

Pricing came at the midpoint of talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 25% to 30%, according to a market source.

The greenshoe was also upsized to $45 million.

The initial size of the deal was $250 million with a greenshoe of $37.5 million.

The new paper was volatile on its market debut with some prints below par. However, the notes regained their footing and climbed alongside stock into the afternoon.

They were changing hands at 103.75 with stock up about 5%, a market source said.

The new paper was expanded 0.5 point to 0.75 point dollar-neutral.

Qudian dominated activity in the secondary space with more than $102 million in reported volume by the mid-afternoon.

Qudian’s ADSs traded to a low of $7.30 and a high of $7.94 before closing the day at $7.84, an increase of 6.23%.

Change trades up

Change Healthcare’s tangible equity units were in demand during bookbuilding and in the aftermarket, sources said.

Change Healthcare priced $250 million, or 5 million units, of three-year par of $50 tangible equity units after the market close on Wednesday with a dividend of 6% and a threshold appreciation premium of 20%.

Pricing came at the midpoint of talk for a dividend of 5.75% to 6.25% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

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

The units priced alongside the Nashville, Tenn.-based health care technology company’s $557.14 million IPO of 42,857,142 shares, which priced at $13.00 per share.

The IPO was slightly downsized with the initial range for the public offering between $16.00 and $19.00 per share.

Change Healthcare’s tangible equity units had not yet started to trade early in the session with the market awaiting the listing of its IPO.

However, once Change Healthcare’s stock was listed, the equity units were changing hands like wildfire.

The units traded up more than $4 and were seen at $54.52 with stock up $1, a market source said.

However, with the IPO just listed, the borrow on the stock was not yet available, a market source said.

The borrow would not become widely available until the deal settled on July 1.

More than 4 million of the units were in play by the late afternoon.

Change Healthcare’s stock traded as high as $15.19 before closing the day at $15.00, an increase of 15.38%.

Like most of the mandatory convertible deals that have priced recently, the tangible equity units skyrocketed in the aftermarket.

With a large amount of mandatory convertibles maturing over the past year, there was a shortage of paper in the universe.

The strong demand for mandatories was driving the performance of the units, sources said.

Day 2

While activity surrounding the paper that hit the market on Wednesday tempered on Thursday, both deals continued to improve, a market source said.

Uniti Group’s 4% convertible notes due 2024 rose almost 2 points outright as stock climbed.

The notes were changing hands on a 104 handle.

They continued to improve on a dollar-neutral basis after a 2 point expansion on their market debut.

The bonds saw about $10 million in reported volume by the late afternoon.

Uniti stock closed Thursday at $9.69, an increase of 3.42%.

Liberty Latin America’s 2% convertible notes due 2024 also continued to see gains in the secondary space.

The notes were changing hands around 100.875 in the mid-afternoon with stock up another 1%.

The notes were expanded about 0.25 point dollar-neutral after a 1.25 point dollar-neutral expansion on their market debut, sources said.

Liberty Latin America’s class C common stock closed Thursday at $17.35, an increase of 0.87%.

After dominating activity during Wednesday’s session, trading activity slowed with about $10 million of the bonds on the tape by the late afternoon.

iQIYI up

iQIYI’s 2% convertible notes due 2025 were making gains on Thursday as stock soared on optimism in the run up to the G-20 summit.

The 2% convertible notes rose 4 points outright to 98 by the late afternoon, according to a market source.

More than $15 million of the bonds were on the tape during Thursday’s session.

The Beijing-based online entertainment service provider’s ADSs skyrocketed on Thursday on optimism headed into the G-20 summit.

The ADSs closed Thursday at $20.03, an increase of 10.18%.

Mentioned in this article:

Change Healthcare Inc. Nasdaq: CHNG

iQIYI Inc. Nasdaq: IQ

Liberty Latin America Ltd. Nasdaq: LILAK

Qudian Inc. NYSE: QD

Uniti Group Inc. Nasdaq: UNIT

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