DISH megadeal, iQIYI, Atlas Corp. convertible offerings eyed; Vail expands on debut

By Abigail W. Adams

Portland, Me., Dec. 16 – The convertibles primary market unleashed a torrent of new offerings on the last full trading week of the year with three deals totaling $2.975 billion set to price after the market close on Wednesday and one new deal making its aftermarket debut.

In one of the largest offerings of the year, DISH Network Corp. plans to price $2 billion of five-year convertible notes after the market close on Wednesday.

While the deal modeled cheap, some sources were not enamored with the offering.

iQIYI Inc. plans to price $800 million of six-year convertible notes and Atlas Corp. plans to sell $175 million of five-year exchangeable notes after the market close on Wednesday.

Atlas’ offering also looked cheap. However, the deal was wall-crossed and already mostly spoken for.

While iQIYI’s offering looked cheap, the name was controversial with the company recently the subject of an SEC investigation.

As the primary market prepped the company’s latest offering, iQIYI’s outstanding convertible notes tanked on an outright basis in high-volume activity.

Meanwhile, new paper from Vail Resorts Inc. made its aftermarket debut with the notes expanded in active trading.

DISH in focus

In one of the largest offerings of the year, DISH 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 30% to 40%.

The deal was in the market with assumptions of 500 basis points over Libor and a 45% vol., a source said.

Using those assumptions, the deal looked 0.81 point cheap at the midpoint of talk.

However, the vol. assumptions were aggressive, a source said.

Using a vol. of 40% to 42%, the deal modeled below par.

Other sources also did not find the deal attractive.

Proceeds from the offering will be used to help the direct-broadcast satellite provider build out its 5G network as it branches out to become a mobile phone service provider.

The offering is largely a play on DISH’s rollout of its mobile network and is expected to attract crossover investors.

iQIYI on deck

iQIYI plans to price $800 million of convertible notes due Dec. 15, 2026 after the market close on Wednesday with price talk for a coupon of 3.75% to 4.25% and an initial conversion premium of 25% to 30%, according to a market source.

Concurrently, the company is pricing a secondary offering of 40 million American Depositary Shares.

While it was unclear what underwriters were using, one source pegged assumptions at 1,500 bps over Libor and a 40% vol.

Using those assumptions, the deal looked about 2 points cheap, a source said.

The assumptions were based on the trading level of the company’s outstanding notes.

While the deal modeled cheap and looked optically attractive with a high coupon and low premium range, the name “has a lot of hair on it,” a source said.

The Beijing-based online entertainment service provider was the subject of an SEC investigation in August following a short-seller report that alleged the company was inflating the cost of acquisitions.

The investigation was ongoing as of October, according to a company news release.

iQIYI is a serial issuer of convertible notes.

The company’s 2% convertible notes due 2025 and 3.75% convertible notes due 2023 tanked in active trading on Wednesday.

The 2% notes dropped 10 points outright with stock off more than 18%.

The notes were changing hands at 88.25 in the late afternoon.

The 3.75% convertible notes were down about 8 points outright.

The notes traded down to 99.25 in the late afternoon.

iQIYI’s ADSs traded to a high of $20.41 and a low of $18.09 before closing the day at $18.10, a decrease of 18.85%.

Atlas wall-crossed

Atlas plans to price $175 million of five-year exchangeable notes after the market close on Wednesday with price talk for a coupon of 3.25% to 3.75% and an initial exchange premium of 27.5% to 32.5%, according to a market source.

The notes will be issued by subsidiary Seaspan Corp. and exchangeable for Atlas shares.

The notes were marketed with assumptions of 600 bps over Libor and a 40% vol., a source said.

Using those assumptions, the deal looked 6.5 points cheap at the midpoint of talk.

Another source pegged the deal almost 7.5 points cheap, using those assumptions.

However, the offering was wall-crossed with the small issue largely spoken for at launch.

Vail expands

Vail Resorts priced a $500 million offering of five-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 at the rich end of initial talk for a coupon of 0% to 0.5% and richer than initial talk for an initial conversion premium of 40% to 45%.

The new paper was active in the secondary space and trading up on debut.

The 0% notes were changing hands in a tight range between 101.875 and 102.25 early in the session.

The notes expanded upwards of 2 points. However, they came in as the session progressed and were expanded 1.25 points dollar-neutral in the late afternoon, a source said.

The notes were trading on about a 55 delta.

Vail’s stock traded to a high of $287.28 and a low of $276.05 before closing the day at $279.69, an increase of 1.33%.

Mentioned in this article:

Atlas Corp. NYSE: ATCO

DISH Network Corp. Nasdaq: DISH

iQIYI Inc. Nasdaq: IQ

Vail Resorts Inc. NYSE: MTN

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