Morning Commentary: Axon, Herbalife convertibles eyed; Lantheus, Marriott surge

By Abigail W. Adams

Portland, Me., Dec. 6 – The convertibles primary and secondary markets were hopping on Tuesday as the long-anticipated end-of-year issuance rush hit the previous session.

The primary market is slated to price two deals totaling $750 million after the market close on Tuesday after pricing $1 billion in two deals post-close on Monday.

Axon Enterprise Inc. plans to price $500 million of five-year convertible notes and Herbalife Nutrition Ltd. plans to sell $250 million of long five-year convertible notes after the market close on Tuesday.

The deals continued to model cheap based on underwriters’ assumptions and were playing to heavy demand during bookbuilding, sources said.

Meanwhile, new paper from Lantheus Holdings Inc. and Marriott Vacations Worldwide Corp. dominated activity in the secondary space with the notes surging on debut.

Axon eyed

Axon Enterprise plans to price $500 million of five-year convertible notes after the market close on Tuesday 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 a 300 basis point credit spread and a 42% vol., a source said.

Using those assumptions, sources pegged the deal about 2 to 3 points cheap at the midpoint of talk.

The coupon range is significantly lower than the recent deals to clear the primary market.

However, Axon is a $13 billion market cap company with cash on the balance sheet and no debt, a source said.

Herbalife eyed

Herbalife plans to price $250 million of long five-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.75% to 4.25% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of a 900 bps credit spread and a 45% vol., according to a market source.

Using those assumptions, the deal looked just north of 3 points cheap at the midpoint of talk, a source said.

While the deal is a refinancing with proceeds to be used to repurchase for cash a portion of the company’s 2.625% convertible notes due 2024 in privately negotiated transactions, the offering was not wall-crossed, a source said.

Lantheus in demand

Lantheus Holdings priced $500 million of five-year convertible notes after the market close on Monday at par at the rich end of talk with a coupon of 2.625% and an initial conversion premium of 42.5%.

Price talk was for a coupon of 2.625% to 3.125% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

The deal played to heavy demand during bookbuilding and surged in secondary market activity.

The notes were marked at 104.5 bid, 104.75 offered with stock largely flat early in the session, a source said.

Lantheus’ stock was changing hands at $56.50, an increase of 0.87%, shortly before 11 a.m. ET.

Marriott Vacations jumps

Marriott Vacations sold $500 million of five-year convertible notes after the market close on Monday at par at the rich end of talk with a coupon of 3.25% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 3.25% to 3.75% and an initial conversion premium of 27.5% to 32.5%.

The new paper played to heavy demand during bookbuilding and made large gains on its secondary market debut.

The 3.25% notes were marked at 103.125 bid, 103.625 offered with stock wavering between gains and losses early in the session.

Marriott’s stock was trading at $142.69, a decrease of 0.28%, shortly before 11 a.m. ET.

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