Morning Commentary: Convertibles primary to price $3.95 billion in six deals post-close

By Abigail W. Adams

Portland, Me., March 5 – The green light remained blazing in the convertibles primary market with one more deal launching early Tuesday, bringing the tally set to price post-close to $3.95 billion in six deals.

SoFi Technologies Inc. joined a packed calendar with a $750 million offering of five-year convertible notes.

It joins MicroStrategy Inc., Tandem Diabetes Care Inc., Kosmos Energy Ltd., LivaNova plc and Albemarle Corp., which all expect to price their offerings post-close.

There was little doubt the deals would get done with the offerings modeling cheap and demand for new paper strong with the two deals to price post-close Monday both seeing a large upsize.

However, sources do expect to see some indigestion amid the deluge of new paper.

If the deals price as announced, Tuesday would mark the single highest volume by face amount since Sept. 9, 2021 and busiest by number of transactions since March 2, 2021.

The primary market cleared $3.97 billion in three deals on Sept. 9, 2021 and $4.439 billion in seven deals on March 2, 2021, according to the Prospect News database.

While market players eyed the onslaught of deals expected post-close, new paper from MP Materials Corp. and iRhythm Technologies Inc. made its aftermarket debut.

The new paper hit the secondary space on a red day for equities with the Dow Jones industrial average down 239 points, or 0.61%, the S&P 500 index down 0.85%, the Nasdaq Composite index down 1.7% and the Russell 2000 index down 0.58% shortly before 11 a.m. ET.

The new paper was performing well on debut although MP Materials’ new notes were weak out of the gate.

SoFi eyed

SoFi plans to price $750 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 400 basis points over SOFR and a 45% vol.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk.

While proceeds from the new convertible notes offering will be used to redeem the company’s 12.5% series 1 preferred stock, the company also addressed its outstanding 0% convertible notes due 2026.

In a separate transaction, SoFi entered into privately negotiated exchange agreements to exchange $600 million in principal of the 0% notes for 61,713,287 shares of common stock.

“This was excellent liability management,” a source said.

MicroStrategy adds Bitcoin

MicroStrategy plans to price $600 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 37.5% to 42.5%.

The deal was heard to be in the market with assumptions of 350 bps over SOFR and a 50% vol.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk.

While MicroStrategy has an upcoming maturity with its 0.75% convertible notes due 2025, the deal did not come as a refinancing; instead, proceeds will be used to purchase more Bitcoin.

The offering comes on the same day Bitcoin blew to a new all-time high with the price hitting $69,210 early Tuesday.

“They should have done this when Bitcoin was at $25,000,” a source said. “But if you’re an institution that can’t own Bitcoin and you want some in your portfolio this is how you do it.”

Tandem in focus

Tandem plans to price $250 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 25% to 30%.

The deal was heard to be in the market with assumptions of 450 bps over SOFR and a 42% vol.

Using those assumptions, the deal looked about 1.875 points cheap at the midpoint of talk, a source said.

Kosmos Energy eyed

Kosmos Energy plans to price $300 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.875% to 3.375% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 600 bps over SOFR and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk, a source said.

LivaNova on tap

LivaNova plans to sell $300 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 400 bps over SOFR and a 35% vol.

Albemarle eyed

Albemarle plans to bring $1.75 billion, or 35 million, three-year $50-par depositary shares representing a 1/20th interest in a share of $1,000-par series A mandatory convertible preferred stock after the market close on Tuesday with price talk for a dividend of 7% to 7.5% and an initial conversion premium of 17.5% to 22.5%.

The deal was heard to be in the market with assumptions of 250 bps over SOFR and a 50% to 47% vol. skew, a source said.

iRhythm strong

iRhythm priced an upsized $575 million, from $450 million, of long five-year convertible notes after the market close on Monday at par with a coupon of 1.5% and an initial conversion premium of 35%.

Pricing came at the rich end of talk for a coupon of 1.5% to 2% and through the rich end of talk for an initial conversion premium of 27.5% to 32.5%.

The strong demand seen during book building followed the notes into the secondary space where they made large outright and dollar-neutral gains.

The notes were trading around 102 early in the session.

They expanded about 2.5 points dollar-neutral, a source said.

iRhythm’s stock was trading at $107.03, a decrease of 1.86%, shortly before 11 a.m. ET.

MP Materials up

MP Materials sold an upsized $650 million, from $500 million, of six-year convertible notes after the market close on Monday at par at the midpoint of talk with a coupon of 3% and an initial conversion premium of 40%.

Price talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 37.5% to 42.5%.

The new paper was weak out of the gate but improved as the session progressed.

The notes traded as low as 99 with stock in the red early in the session with the notes moving in line dollar-neutral.

However, the convertibles quickly popped above par and were trading at 100.5 as the session progressed.

The notes expanded 0.5 point dollar-neutral, a source said.

MP Materials’ stock was trading at $15.09, a decrease of 2.83%, shortly before 11 a.m. ET.

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