Live Nation convertibles jump on debut; Oak Street notes skyrocket on takeover news

By Abigail W. Adams

Portland, Me., Jan. 10 – The convertibles primary market was dormant on Tuesday after pricing the first new deal of 2022 post-close on Monday.

However, more offerings are expected, especially given the heavy demand and strong aftermarket performance of Live Nation Entertainment, Inc.’s new convertible notes.

The secondary space was hopping on Tuesday with new paper and topical news jumpstarting trading activity on a strong day for equity markets.

Equity indexes saw a choppy start to Tuesday’s session but closed in the green with the Dow Jones industrial average up 186 points, or 0.56%, the S&P 500 index closed up 0.70%, the Nasdaq Composite index closed up 1.01% and the Russell 2000 index closed up 1.49%.

There was $745 million in reported volume about one hour before the market close with Live Nation’s new 3.125% convertible notes due 2029 accounting for almost a fourth of the total reported volume in the space.

Oak Street Health Inc.’s 0% convertible notes due 2026 also saw heavy volume with the notes posting strong outright and dollar-neutral gains on news of a potential takeover.

Live Nation in demand

Live Nation 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 were seen at 102.375 versus a stock price of $72.18 in the late afternoon.

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

There was $184 million in reported volume.

Live Nation’s stock traded to a high of $73.15 and a low of $70.81 before closing the day at $72.56, an increase of 0.43%.

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.

Oak Street’s takeover

Oak Street’s 0% convertible notes due 2026 were in the spotlight on Tuesday with the notes making large outright and dollar-neutral gains on news of a potential takeover.

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 and were changing hands at 87.875 versus a stock price of $28.64 in the late afternoon.

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

There was a frenzy of trading activity in the name with $50 million in reported volume.

Oak Street’s stock traded to a low of $28.30 and a high of $29.96 before closing the day at $28.77, an increase of 27.47%.

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.

While a deal has not yet been formally announced, Oak Street has long been eyed as an acquisition target.

“Those things are gone,” a source said of the convertible notes.

Mentioned in this article:

Live Nation Entertainment, Inc. NYSE: LYV

Oak Street Health Inc. NYSE: OSH

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