Morning Commentary: Live Nation convertibles jump on debut; Oak Street notes skyrocket

By Abigail W. Adams

Portland, Me., Jan. 10 – While the convertibles primary market was quiet early Tuesday after pricing the first new deal of 2022, more deals are expected in the coming days, especially in light of the market’s strong response.

Live Nation Entertainment, Inc. priced an upsized $900 million of six-year convertible notes after the market close on Monday at par with a coupon of 3.125% and an initial conversion premium of 50%.

Pricing came toward the rich end of tightened talk for a coupon of 3% to 3.5% and in line with talk for an initial conversion premium of 50%, according to a market source.

Initial price talk was for a coupon of 3.25% to 3.75% and an initial conversion premium of 45% to 50%.

The greenshoe was also upsized to $100 million.

The initial size of the deal was $850 million with a greenshoe of $85 million.

The refinancing deal played to heavy demand during bookbuilding with the offering well oversubscribed at tightened talk.

“There was very strong demand. It’s a good credit and people know the name,” a source said.

The demand followed the new paper into the secondary space with the notes skyrocketing out of the gate.

The notes were changing hands in the 102.5 to 103 context with stock flat early in the session.

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

Live Nation’s stock was seen at $71.29, a decrease of 1.33%, shortly before 11 a.m. ET.

The deal was a refinancing with the entertainment group repurchasing $440 million of its outstanding 2.5% convertible notes due March 15, 2023 for $489.3 million in cash in privately negotiated transactions.

The repurchase price appeared to be 110.15.

While new paper from Live Nation was in focus, topical news pushed Oak Street Health Inc.’s 0% convertible notes due 2026 into the spotlight.

The 0% convertible notes climbed 11 points outright as stock surged double digits following news CVS was in acquisition talks with the health care provider.

The notes were marked at 87.75 bid, 88.25 offered early in the session.

They expanded 6 points dollar-neutral, a source said.

There was a frenzy of trading activity in the name with $40 million on the tape early in the session.

Oak Street’s stock was trading at $28.96, an increase of 28.31%, shortly before 11 a.m. ET.

The convertible notes and stock skyrocketed following a Bloomberg report that CVS was in acquisition talks with Oak Street in a deal estimated to be about $10 billion.

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