Herbalife, Axon convertibles on deck; Lantheus, Marriott Vacations play to heavy demand

By Abigail W. Adams

Portland, Me., Dec. 5 – The convertibles primary market burst into action on Monday after two weeks without issuance with two sizable offerings set to price after the market close and two more on deck for Tuesday.

Lantheus Holdings Inc. plans to price $500 million of five-year convertible notes and Marriott Vacations Worldwide Corp. plans to sell $500 million of five-year convertible notes after the market close on Monday.

The deals continued to carry attractive yields, looked cheap based on underwriters’ assumptions, and played to heavy demand, sources said.

“They’re blowouts,” a source said.

Herbalife Nutrition Ltd. plans to price $250 million of long five-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.75% to 4.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

BofA Securities Inc. and Mizuho Securities USA Inc. are bookrunners for the Rule 144A offering, which carries a greenshoe of $37.5 million.

Axon Enterprise Inc. plans to sell $500 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 27.5% to 32.5%, according to a market source.

Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $75 million.

As market players eyed the new deals in the works, the secondary space was quiet with equity markets launching the week deep-in-the-red.

The Dow Jones industrial average closed Monday down 483 points, or 1.40%, the S&P 500 index closed down 1.79%, the Nasdaq Composite index closed down 1.93% and the Russell 2000 index closed down 2.78%.

Markets were once again questioning the dovish pivot rally after the latest economic data point, the ISM services report, came in hotter than expected, reflecting continued economic expansion.

There was $75 million in reported volume early in the session and $292 million on the tape about one hour before the market close.

There was some pressure on the market amid the downturn in equities and with accounts selling to make room for new paper; however, nothing was “too drastic,” a source said.

Marriott’s outstanding 0% convertible notes due 2026 contracted on the heels of the new offering; however, the notes held up well considering the attractive terms of the new offering.

NCL Corp. Ltd.’s 1.125% notes due 2027 exchangeable for Norwegian Cruise Line Holdings Ltd.’s stock were among the most actively traded issues in the secondary space although with little movement in price.

Lantheus oversubscribed

Lantheus plans to price $500 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 2.625% to 3.125% and an initial conversion premium of 37.5% to 42.5%.

The deal was heard to be in the market with assumptions of a 375 basis points credit spread and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of talk.

The deal played to heavy demand during bookbuilding with the offering multiple times oversubscribed, a source said.

There was strong outright demand for the paper with allocations expected to be tight and concentrated with outright accounts, a source said.

The deal is expected to price at the rich end of talk.

The demand for the paper was no surprise with the medical diagnostics company a first-time convertible issuer and the credit good, a source said.

The deal is expected to do well on its secondary market debut.

Marriott looks ‘cheap’

Marriott Vacations plans to price $500 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of a 400 bps credit spread and a 35% vol., according to a market source.

The offering looked about 3 points cheap at the midpoint of talk.

The deal was also heard to be playing to heavy demand and is expected to perform well in the aftermarket.

While market players eyed Marriott Vacations’ new offering, the company’s 0% convertible notes due 2026 contracted.

The 0% convertible notes fell 2 points outright.

They were changing hands just shy of 101 versus a stock price of $143.44 in the late afternoon.

The notes were down about 0.75 point dollar-neutral.

Marriott’s stock traded to a high of $146.89 and a low of $142.05 before closing the day at $143.13, a decrease of 5.05%.

While the 0% notes came in, they held up better than expected given the terms of the new deal.

The 0% notes are balanced convertible notes, which has become increasingly rare in the convertibles secondary space.

The 0% notes carry a conversion premium of only 18% versus the 30% premium at the midpoint of talk on the new offering.

However, the 0% convertible notes offer no current income and the yield on Marriott’s latest offering is attractive.

Norwegian active

Norwegian’s 1.125% exchangeable notes due 2027 were among the most actively traded issues in the secondary space although with little movement in price.

The 1.125% notes were trading just shy of 77 in the late afternoon with the yield at 7.661%, according to a market source.

There was $14 million in reported volume.

Norwegian’s stock traded to a low of $16.15 and a high of $16.97 before closing the day at $16.21, a decrease of 2%.

Mentioned in this article:

Axon Enterprise Inc. Nasdaq: AXON

Herbalife Nutrition Ltd. NYSE: HLF

Lantheus Holdings Inc. Nasdaq: LNTH

Marriott Vacations Worldwide Corp. NYSE: VAC

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH

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