Morning Commentary: BlackBerry convertibles price, rise on debut; BrightSpring on deck

By Abigail W. Adams

Portland, Me., Jan. 25 – The convertibles primary market unleashed the first new paper of the week on Thursday with one more deal set to price after the market close.

BlackBerry Ltd. priced an upsized $175 million of five-year convertible notes after the market close on Wednesday in a wall-crossed refinancing.

After more than one week on the calendar, BrightSpring Health Services Inc.’s $400 million offering of $50-par three-year tangible equity units is slated to price post-close alongside the company’s IPO.

The new paper comes on a strong day for equity and Treasury markets with the latest GDP print blowing past expectations.

Equity indexes notched strong gains as the latest macro data continued to support a goldilocks scenario of rate cuts with no recession.

The Dow Jones industrial average was up 60 points, or 0.16%, the S&P 500 index was up 0.39%, the Nasdaq Composite index was up 0.54% and the Russell 2000 index was up 0.89% shortly before 11 a.m. ET.

The secondary space remained relatively active with $131 million in reported volume.

BlackBerry’s new notes were in focus and putting in a strong performance on debut.

BlackBerry gains on debut

BlackBerry priced an upsized $175 million of five-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 3% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 30% to 35%.

The initial size of the offering was $160 million. The $25 million greenshoe was not upsized.

The small refinancing deal was heard to be wall-crossed and mostly spoken for at the time of launch.

Proceeds from the offering will be used to fund the repayment or repurchase of the company’s outstanding $150 million 1.75% extendible convertible debentures due Feb. 15, 2024.

The new paper dominated activity in the secondary space and logged strong gains on debut.

The notes were trading at 103 versus a stock price of $2.95 about one hour after the opening bell, according to a market source.

The notes were mostly trading outright early in the session, a source said.

There was $25 million in reported volume.

BlackBerry’s stock was trading at $3.04, an increase of 3.75%.

BrightSpring eyed

BrightSpring’s plans to price $400 million of $50-par three-year tangible equity units after the market close on Thursday with price talk for a dividend of 6.25% to 6.75% and a threshold appreciation premium of 17.5% to 22.5%.

The tangible equity units are being marketed with assumptions of 600 bps over SOFR and a 40% to 37% vol. skew.

The deal is an interesting one with the equity units pricing concurrently with the company’s IPO, a rare, although not unheard of, situation.

While sources pegged the equity units 2 to 3 points cheap at the midpoint of talk, the real value will be determined by the company’s equity, which is still an unknown, sources said.

BrightSpring is planning on pricing 53.3 million shares in the $15 to $18 range.

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