Morning Commentary: Unity Software gains, Norwegian flat on debut; Arrival, Stem eyed

By Abigail W. Adams

Portland, Me., Nov. 17 – The deluge of new convertible bonds continued on Wednesday with two deals totaling $550 million set to price after the market close and three deals totaling $2.675 billion making their aftermarket debut.

Stem, Inc. plans to price $350 million of seven-year convertible notes and Arrival SA plans to price $200 million of five-year convertible notes after the market close.

Both offerings are being marketed as green convertible notes and looked cheap based on underwriters’ assumptions.

As market players eyed the new deals in the pipeline, new paper from Unity Software Inc., NCL Corp. Ltd. and Veritone Inc. made its aftermarket debut.

The new paper was putting in mixed performances with Unity trading up on an outright and dollar-neutral basis while Norwegian’s exchangeable notes fell flat.

Green convertibles

Arrival plans to price $200 million of five-year green convertible notes after the market close on Wednesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 22.5% to 27.5%.

The deal from the Luxembourg-based electric vehicle manufacturer was in the market with assumptions of 850 bps over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked 8 points cheap at the midpoint of talk.

Stem plans to price $350 million of seven-year green convertible notes after the market close on Wednesday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 425 bps over Libor and a 43% vol., according to a market source.

Using those assumptions, the deal looked 2.54 points cheap at the midpoint of talk.

Unity in demand

Unity Software priced $1.5 billion of five-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 57.5%.

Pricing came at the rich end of initial talk for a coupon of 0% to 0.25% and richer than initial talk for an initial conversion premium of 47.5% to 52.5%.

The new paper traded in a range of par to 102.375 on an outright basis early in the session.

It was changing hands at 100.875 versus an equity price of $194.67 early in the session.

The notes were expanding dollar-neutral.

There was more than $164 million in estimated volume.

Unity’s stock wavered between gains and losses early in the session and was largely flat shortly before 11 a.m. ET.

Stock was $195.44, a decrease of 0.21%.

Norwegian sails

NCL priced an upsized $1 billion of six-year exchangeable notes after the market close on Tuesday at par with a coupon of 1.125% and an initial conversion premium of 42.5%.

Pricing came at the rich end of talk for a coupon of 1.125% to 1.625% and an initial exchange premium of 37.5% to 42.5%, according to a market source.

The greenshoe was also upsized to $150 million.

The initial size of the offering was $800 million with a greenshoe of $120 million.

Concurrently, the company priced a secondary offering of 42,858,854 shares at a price of $23.64 per share.

The new paper was wrapped around par in active trading with stock flat.

Stock was $23.54, a decrease of 0.4%, shortly before 11 a.m. ET.

Veritone upsizes

Veritone priced an upsized $175 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 1.75% and an initial conversion premium of 32.5%.

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

The greenshoe was also upsized to $26.25 million.

The initial size of the offering was $150 million with a greenshoe of $22.5 million.

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