Upsized Broadcom mandatory trades to 101; Pinduoduo convertible active; Lannett adds

By Rebecca Melvin

New York, Sept. 25 – Broadcom Inc.’s newly priced 8% mandatory convertible preferred shares traded up on their debut in the convertibles market on Wednesday after the San Jose, Calif.-based chip maker priced an upsized $3.25 billion of the three-year paper.

The new Broadcom preferreds opened at 100 bid with shares lower at the open after the deal priced on an overnight basis. Later the convertible was quoted at 100.55 bid, 100.75 offered and closed at 101, according to a New York-based market source.

The source said the deal went “very well” and was “well digested.”

“It was overnight, so the market had to price the stock drop – the stock opened and traded around 272 and the bond nuked up with stock higher on the day,” the source said.

Pinduoduo Inc.’s 0% five-year convertible senior notes were trading actively in the morning session, moving up to around 102.75 with shares of the China-based e-commerce company higher. The Pinduoduo shares closed up $1.26, or 4.1%, to $32.25.

Pinduoduo sold $875 million of the notes that debuted in secondary action on Tuesday, and there were $165.6 million of trades in those bonds on Wednesday morning, according to Trace data.

Lannett Co. Inc.’s new $75 million deal of 4.5% seven-year convertible senior notes was also higher in trade to about 102.5 last, with the common shares of the Philadelphia-based generic drug company taking a hit and down 15.5% after the company priced the Rule 144A, overnight convertibles deal with a 10% initial conversion premium.

The Lannett shares closed down $2.43, or 17.5%, to $11.47.

The notes are non-callable for four years and then provisionally callable at a price trigger of 130%. They will be settled in shares at maturity.

Elsewhere, Etsy Inc.’s recently priced $660 million convertible was trading. That 0.125% notes due 2026 traded down about 2 points to 97.5 with the shares trending lower. The shares closed down $1.90, or 3.3%, at $55.00.

In the international convertible markets, France’s Kering SA plans to price €500 million of 0% bonds due 2022 exchangeable for ordinary shares of Puma SE. Pricing was expected to occur later on Wednesday, according to a market source.

The Regulation S only bonds were being talked at an issue price of 107.25 to 108.75 and an initial exchange premium of 30% to 35%.

Joint bookrunners are Credit Agricole CIB (global coordinator), Societe Generale and HSBC.

The bonds are non-callable for two years and then provisionally callable at par at a price trigger of 125%.

There are no puts, except in the event of a change of control of Kering combined with a rating downgrade or in the event of a change of control of Puma or in the event of a delisting of Puma shares.

Proceeds will be used for general corporate purposes.

Puma is a German multinational company, of which Kering owns 16%.

Paris-based Kering is a luxury brands group.

Broadcom trades well

Broadcom’s newly priced 8% mandatory convertible preferreds due 2022 traded at 100 bid at the open on Wednesday and were trading around 100.55 bid, 100.75 offered in afternoon action. The deal was “well digested” and closed above 101.

It was an overnight deal so the market had to cope with the drop in common shares at the open. The stock traded at around $272.00 and the bond nuked up with the stock higher on the day.

“Most outright accounts bought the deal so it was a big win for the market,” a market source said.

The mandatories had been initially talked as a $3 billion deal, but it was upsized to $3.25 billion. They priced with a 16.9% initial conversion premium.

Most of Broadcom’s sales are made in China, so the company has been hurt by the U.S.-China trade war, and it has lagged its peers significantly this year in terms of returns.

The Broadcom shares closed down $6.24, or 2.3%, to $275.77. The bonds been down as much as 5% after the mandatory deal was announced after the market close on Tuesday, but they gradually recovered through Wednesday’s session.

Mentioned in this article:

Broadcom Inc. Nasdaq: AVGO

Etsy Inc. Nasdaq: ETSY

Lannett Co. Inc. NYSE: LCI

Pinduoduo Inc. NYSE: ADS: PDD

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