Morning Commentary: Airbnb, RealReal convertibles eyed; supply floods the secondary

By Abigail W. Adams

Portland, Me., March 3 – The convertibles market was awash in new supply on Wednesday with the primary market set to price two deals totaling $2.25 billion after the market close and $3.86 billion in six deals flooding the secondary space.

Airbnb Inc. is on deck with the largest offering of the year – a $2 billion megadeal of five-year convertible notes.

The deal looked cheap based on underwriters’ assumptions. However, the terms remained aggressive.

The RealReal Inc. is also returning to the convertibles market with a $250 million offering of seven-year convertible notes.

The deal also modeled cheap at the midpoint of talk.

Meanwhile, as market players eyed the deals in the works, new paper from PennyMac Corp., Beyond Meat Inc., Haemonetics Corp., Ceridian HCM Holding Inc., Cable One Inc. and Fastly Inc. flooded the secondary space.

Pricing of the new paper was mixed with several of the deals pricing with a 0% coupon but pricing falling on the cheap end of the initial conversion premium range.

Airbnb on tap

Airbnb plans to price $2 billion of five-year convertible notes after the market close on Wednesday with price talk for a fixed coupon of 0% and an initial conversion premium of 60% to 65%.

The deal was heard to be in the market with assumptions of 200 basis points over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk.

While the convertibles market has seen several $1 billion plus deals, Airbnb’s offering is the largest year to date.

Airbnb is also one of the youngest companies to price a convertible bond deal with the online vacation rental marketplace going public as recently as December 2020.

RealReal eyed

The RealReal plans to sell $250 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be marketed with assumptions of 475 bps over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked 0.71 point cheap at the midpoint of talk.

PennyMac at the mids

PennyMac priced an upsized $300 million, from $200 million, of five-year notes exchangeable for PennyMac Mortgage Investment Trust stock at par with a coupon of 5.5% and an initial exchange premium of approximately 15%.

Pricing came at the midpoint of talk for a coupon of 5.25% to 5.75% and an initial exchange premium of 12.5% to 17.5%, according to a market source.

Haemonetics prices

Haemonetics sold an upsized $435 million of five-year convertible notes after the market close on Tuesday at par with a 0% coupon and an initial conversion premium of 40%.

Pricing came at the rich end of talk for a coupon of 0% to 0.5% and at the cheap end of talk for an initial conversion premium of 40% to 45%.

Cable One’s two tranches

Cable One priced an aggregate of $800 million of convertible notes in five- and seven-year tranches after the market close on Tuesday.

The deal consists of an upsized $500 million, from $400 million, tranche of five-year notes, which priced at par with a coupon of 0% and an initial conversion premium of 25%.

Pricing came in line with talk for a fixed coupon of 0% and at the cheap end of talk for an initial conversion premium of 25% to 30%, according to a market source.

The deal also includes an upsized $300 million, from $200 million, tranche of seven-year notes, which priced at par with a coupon of 1.125% and an initial conversion premium of 25%.

Pricing came toward the cheap end of talk for a coupon of 0.75% to 1.25% and at the cheap end of talk for an initial conversion premium of 25% to 30%.

Beyond Meat mixed

Beyond Meat brought an upsized $1 billion of six-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 47.5%.

Pricing came in line with talk for a fixed coupon of 0% and at the cheap end of talk for an initial conversion premium of 47.5% to 52.5%, according to a market source.

Fastly upsized

Fastly sold an upsized $825 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 45%.

Pricing came at the rich end of talk for a coupon of 0% to 0.25% and at the cheap end of talk for an initial conversion premium of 45% to 50%, according to a market source.

Ceridian mixed

Ceridian priced $500 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 0.25% and an initial conversion premium of 47.5%.

Pricing came at the midpoint of talk for a coupon of 0% to 0.5% and at the cheap end of talk for an initial conversion premium of 47.5% to 52.5%, according to a market source.

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