Morning Commentary: Post, Liberty Media convertibles hit aftermarket, expand on debut

By Abigail W. Adams

Portland, Me., Aug. 10 – It was an active morning in the convertible secondary space on Wednesday with $925 million of new paper entering the space.

Liberty Media Corp. priced an upsized $425 million offering of five-year convertible notes and Post Holdings Inc. priced an upsized $500 million of five-year convertible notes after the market close on Tuesday.

The deals played to solid demand during bookbuilding with Post Holdings’ offering wall-crossed and Liberty Media’s latest deal a refinancing.

They hit the secondary space on a strong day for risk assets with July’s Consumer Price Index report coming in below expectations.

Both issues made large gains on an outright and dollar-neutral basis out of the gate as equity indexes resumed their upward momentum.

The Dow Jones industrial average was up 569 points, or 1.73%, the S&P 500 index was up 2.02%, the Nasdaq Composite index was up 2.6% and the Russell 2000 index was up 2.6% shortly before 11 a.m. ET.

“The tone has definitely improved,” a source said.

Liberty expands

Liberty Media priced an upsized $425 million, from $375 million, offering of five-year convertible notes after the market close on Tuesday at par with a coupon of 2.25% and an initial conversion premium of 30%.

Pricing came at the rich end of talk for a coupon of 2.25% to 2.75% and at the midpoint of talk for an initial conversion premium of 27.5% to 32.5%.

The notes will be convertible into Liberty’s series C Liberty Formula One common stock and will be attributed to the Liberty Formula One tracking group.

The new paper jumped out of the gate.

They were trading as high as 103.75 early in the session.

The notes expanded about 1.5 to 2 points dollar-neutral, a source said.

Liberty Formula One’s common stock was changing hands at $68.42, an increase of 3.35%, shortly before 11 a.m. ET.

Liberty Media’s latest offering was a refinancing with proceeds to be used to repurchase approximately $209 million in principal amount of Liberty’s 1% cash convertible notes due 2023 in privately negotiated transactions.

There were several prints of the 1% notes at 180.96 early in the session, which appeared to be their buyback price.

Post jumps

Post Holdings priced an upsized $500 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 2.5% and an initial conversion premium of 17.5%.

Pricing came at the midpoint of talk for a coupon of 2.25% to 2.75% and at the cheap end of talk for an initial conversion premium of 17.5% to 22.5%.

The greenshoe was also upsized to $75 million.

The initial size of the offering was $400 million with a greenshoe of $60 million.

The deal was in the market with assumptions of 325 bps over Libor and a 24% vol., a source said.

Using those assumptions, the deal looked 1.28 points cheap at the midpoint of talk.

However, the offering was wall-crossed, a source said, and priced shortly after launching.

The new paper skyrocketed out of the gate.

They expanded 5 points dollar-neutral in early trading, a source said.

Post’s stock was changing hands at $87.42, a decrease of 3.18%, shortly before 11 a.m. ET.

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