IMAX, Rapid7, Centennial Resource on deck; DraftKings, Magnite eyed; Airbnb gains

By Abigail W. Adams

Portland, Me., March 15 – The parade of new convertibles deals continued on Monday with two offerings totaling $1.35 billion slated to price after the market close and two more deals totaling $700 million on deck for Tuesday.

IMAX Corp. plans to price $200 million of five-year convertible notes and Rapid7 Inc. plans to sell $500 million of six-year convertible notes after the market close on Tuesday.

Centennial Resource Development Inc. is also in the market with $150 million of seven-year exchangeable notes.

DraftKings Inc. plans to price $1 billion of seven-year convertible notes, and Magnite plans to sell $350 million of five-year convertible notes after the market close on Monday.

DraftKings and Magnite modeled cheap based on underwriters’ assumptions although the pricing of the deals was expected to come mixed.

Meanwhile, it was a firm day in the secondary space with several recent issues improving alongside their equity as the S&P 500 again hit fresh heights.

There was about $602 million in reported volume heading into the market close.

Airbnb Inc.’s 0% convertible notes due 2026 hit their highest outright level since pricing on March 4.

Oak Street Health Inc.’s 0% convertible notes due 2026 were also improved in active trading.

The calendar

The convertibles primary market was in full force at the start of the week with two offerings slated to price after Monday’s close and two more on deck for Tuesday.

IMAX plans to sell $200 million of five-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 30% to 35%, according to a market source.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC and Citigroup Global Markets Inc. are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $30 million.

Rapid7 plans to price $500 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.25% and an initial conversion premium of 30% to 35%, according to a market source.

Goldman Sachs & Co. LLC and Barclays are active bookrunners for the Rule 144A offering, which carries a greenshoe of $75 million.

RBC Capital Markets LLC and Citigroup are passive bookrunners.

Centennial Resource Development plans to sell $150 million of seven-year exchangeable notes, according to a company news release.

The notes will be issued by Centennial Resource Production LLC and exchangeable for Centennial Resource Development’s shares.

Citigroup, JPMorgan and Jefferies LLC are joint bookrunners for the registered offering, which carries a greenshoe of $22.5 million.

Further details were not available by press time.

DraftKings eyed

DraftKings plans to sell $1 billion of seven-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

The deal was heard to be in the market with assumptions of 300 basis points over Libor and a 45% vol.

Using those assumptions, the deal looked 2.125 points cheap at the midpoint of talk, a source said.

The short interest in the name is 6.47%.

While the company has a huge market cap, some sources felt the credit spread for the company was tight.

DraftKings went public less than one year ago in April 2020.

However, the online gaming company played to solid demand with the notes heard to be pricing at the rich end of talk with a coupon of 0% and at the midpoint of talk with an initial conversion premium of 40%, according to a market source.

Magnite looks cheap

Magnite plans to price $350 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

Underwriters were marketing the deal with assumptions of 350 bps over Libor and a 45% vol.

Using those assumptions, the deal looked 2.8 points cheap at the midpoint of talk, a source said.

The short interest in the name is 8.32%.

While a smaller issue, sources found the deal attractive.

The issue will be index eligible and the deal is expected to do well, a source said.

Books closed in the early afternoon with no change to the initial price talk.

Airbnb in focus

Airbnb’s 0% convertible notes due 2026 hit their highest outright level on Monday since pricing.

The 0% notes traded up to 109 in active trading.

However, they were largely moving in line on a dollar-neutral, or hedged, basis, a source said.

There was more than $26 million of the bonds on the tape.

Airbnb’s stock traded to a high of $213.74 and a low of $203.81 before closing the day at $209.99, an increase of 1.57%.

Oak Street gains

Oak Street’s 0% convertible notes due 2026 also continued to improve their second day in the secondary space.

The 0% convertible notes gained 4 points outright with stock up more than 3%.

They were changing hands at 103.5 versus a stock price of $59.49 in the late afternoon.

The notes were up about 0.25 point dollar-neutral, a source said.

Oak Street’s stock traded to a high of $59.77 and a low of $54.76 before closing the day at $58.56, an increase of 3.63%.

The notes saw a volatile aftermarket debut last Friday.

After trading as high as 101.625, they closed the day below par.

However, the notes expanded 0.25 point dollar-neutral, a source said.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

Centennial Resource Development Inc. Nasdaq: CDEV

DraftKings Inc. Nasdaq: DKNG

IMAX Corp. NYSE: IMAX

Magnite Nasdaq: MGNI

Oak Street Health Inc. NYSE: OSH

Rapid7 Inc. Nasdaq: RPD

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