Morning Commentary: Welltower, TransMedics convertible notes offerings emerge

By Abigail W. Adams

Portland, Me., May 8 – The convertibles primary market was in high gear early Monday with $1.05 billion in two deals launching.

Welltower OP LLC plans to price a $750 million offering of five-year notes exchangeable for Welltower Inc. shares and TransMedics Group Inc. plans to price $300 million of five-year convertible notes after the market close on Monday.

The deals launched on an off day for equities with indexes giving back some of the strong gains from the previous session.

The Dow Jones industrial average was down 51 points, or 0.16%, the S&P 500 index was down 0.01%, the Nasdaq Composite index was down 0.19% and the Russell 2000 index was down 0.34% shortly before 11 a.m. ET.

The convertibles secondary space was off to a slow start with the market’s focus on the new deals in the works.

There was $41 million in reported convertibles trading volume about one hour into the session with no name seeing more than $5 million in reported volume.

Welltower on tap

Welltower plans to sell a $750 million offering of five-year exchangeable notes after the market close on Monday with price talk for a coupon of 2.25% to 2.75% and an initial exchange premium of 22.5% to 27.5%.

The deal was heard to be in the market with assumptions of 175 basis points over SOFR and a 26% vol.

The senior housing and health care-focused REIT is the latest investment-grade issuer to tap the convertibles market for refinancing needs.

Proceeds will be used for general corporate purposes, which may include the repayment or redemption of the company’s 4.5% senior notes due Jan. 15, 2024 and 3.625% senior notes due March 15, 2024.

TransMedics eyed

TransMedics plans to price $300 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of a 550 bps spread over SOFR and a 45% vol.

Using those assumptions, the deal looked 2.16 points cheap at the midpoint of talk.

The deal looked attractive and is expected to play to strong demand from hedge accounts, sources said.

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