Chegg, Cinemark Middleby convertibles on tap; Envestnet, Parsons eyed; Lyft active

By Abigail W. Adams

Portland, Me., Aug. 17 – The convertibles primary market launched another active week with five offerings on deck.

In overnight deals, Envestnet Inc. plans to price $450 million of five-year convertible notes and Parsons Corp. plans to sell $300 million of five-year convertible notes after the market close on Monday.

The offerings looked cheap and were heard to have gone well with books on both closing in the early afternoon, sources said.

Middleby Corp. plans to price $550 million of five-year convertible notes, Cinemark Holdings Inc. plans to price $400 million in five-year convertible notes and Chegg Inc. plans to sell $750 million of six-year convertible notes after the market close on Tuesday.

Meanwhile, the secondary space started the week with a crawl with just $34 million in reported volume about one hour into the session and $291 million about one hour before the close.

Lyft Inc.’s 1.5% convertible notes due 2025 were active with the notes down outright but expanding dollar-neutral as stock sold off after the company threatened to suspend operations in California.

Teladoc Health Inc.’s 1.25% convertible notes due 2027 also saw renewed attention with the notes gaining outright as stock soared following an analyst upgrade.

The calendar

In addition to the two overnight offerings that launched prior to Monday’s open, three deals slated to price after Tuesday’s close joined the calendar.

Middleby plans to sell $550 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 30% to 35%.

BofA Securities Inc., J.P. Morgan Securities LLC, Wells Fargo Securities LLC, BMO Capital Markets Corp. and Guggenheim Partners are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $82.5 million.

Chegg plans to price $750 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Morgan Stanley & Co. LLC is the bookrunner for the Rule 144A offering, which carries a greenshoe of $112.5 million.

Chegg will use a portion of the proceeds to repurchase or exchange up to $172.5 million of the principal amount of its existing 0.25% convertible notes due 2023.

Cinemark Holdings plans to price $400 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 4.5% to 5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Barclays (lead left), JPMorgan, RBC Capital Markets Corp. and Wells Fargo are active bookrunners for the Rule 144A offering, which carries a greenshoe of $60 million.

Envestnet in demand

Envestnet plans to sell $450 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 30% to 35%.

The deal was marketed with assumptions of 400 basis points over Libor and a 35% vol, according to a market source.

Using those assumptions, the deal looked 3.37 points cheap at the midpoint of talk, a source said.

The deal from the serial issuer of convertible notes was in demand with books closing early, sources said.

The financial services company currently has $345 million outstanding in 1.75% convertible notes due 2023.

However, proceeds will not be used to refinance the convertible notes but rather will be used to repay the outstanding balance under the company’s credit facility.

Parsons eyed

Parsons plans to price $300 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be in the market with assumptions of 300 bps over Libor and a 45% vol., a source said.

Using those assumptions, the deal looked 3.27 points cheap at the midpoint of talk.

While the deal modeled cheap, some sources were not enamored with the pricing.

The technology company serving the defense, intelligence, and critical infrastructure market is a first-time issuer of convertible notes.

Market players were just becoming acquainted with the company’s story, a source said.

Lyft improves

Lyft’s 1.5% convertible notes due 2025 were among the most actively traded issues of Monday’s session.

While the notes were down outright, they were improved on swap as the ride-sharing company’s stock took a hit.

The 1.5% convertible notes dropped 2 points outright to 103.875 in the late afternoon.

They expanded about 0.5 point dollar-neutral.

“There are definitely buyers out there looking for them,” a source said.

The bonds saw more than $10.5 million in reported volume in the late afternoon.

Lyft stock traded to a high of $28.42 and a low of $26.52 before closing the day at $27.17, a decrease of 4.7%.

Stock sold off after the company announced that it may suspend operations in California as soon as this week due to a court order forcing them to reclassify their drivers as employees as opposed to independent contractors.

The court order was the result of a legislation passed in 2019 restricting the use of the independent contractor designation.

Ride-sharing companies Uber and Lyft are backing a ballot initiative in November that would make them exempt from the law.

Both companies have threatened to suspend operations in California until the results of the ballot initiative.

Teladoc gains

Teladoc’s 1.25% convertible notes due 2027 were up outright as stock soared following an analyst upgrade.

The 1.25% notes gained almost 5 points outright to 123 as stock soared more than 8%.

However, the notes were largely moving in line dollar-neutral.

Teladoc stock traded to a high of $206.33 and a low of $190.62 before closing the day at $205.02, an increase of 9.34%.

Stock soared after Credit Suisse upgraded the stock to “outperform” from “neutral” and lifted the price target to $249 from $225.

The upgrade was due to Teladoc’s merger with Livongo Health Inc. which, analysts believe will make the company a telemedicine powerhouse.

Teladoc and Livongo announced they would merge in a cash and stock deal valued at $18.5 billion in early August.

Mentioned in this article:

Chegg Inc. NYSE: CHGG

Cinemark Holdings Inc. NYSE: CNK

Envestnet Inc. NYSE: ENV

Lyft Inc. Nasdaq: LYFT

Middleby Corp. Nasdaq: MIDD

Parsons Corp. NYSE: PSN

Teladoc Health Inc. NYSE: TDOC

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