Uniti Group, Change Healthcare on tap; Caesars Entertainment expands; Herbalife active

By Abigail W. Adams

Portland, Me., June 24 – The convertibles primary market launched one new deal on Monday on what is expected to be an active week for new issue activity.

Uniti Group Inc. plans to price $300 million of five-year exchangeable notes after the market close on Tuesday with price talk for a coupon of 4% to 4.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The notes will be issued by subsidiary Uniti Fiber Holdings Inc.

Citigroup Global Markets Inc., Barclays, J.P. Morgan Securities LLC, BofA Securities Inc., RBC Capital Markets LLC, Wells Fargo Securities Inc. and SunTrust Robinson Humphrey Inc. are bookrunners for the Rule 144A deal, which carries a greenshoe of $45 million.

After a long marketing period, Change Healthcare Inc. will also price its $250 million offering of three-year par of $50 tangible equity units after the market close on Tuesday, concurrently with its IPO.

Price talk is for a dividend of 5.75% to 6.25% and a threshold appreciation premium of 17.5% to 22.5%.

Meanwhile, some highly anticipated news jumpstarted activity in the secondary space with $83 million in reported volume about one hour into Monday’s session and $330 million in reported volume by the mid-afternoon.

One issue was responsible for the lion’s share of the trading activity – Caesars Entertainment Corp.’s 5% convertible notes due 2024.

The 5% notes jumped on an outright and dollar-neutral basis as details of Eldorado Resorts’ buyout of the gaming company emerged.

However, with interests in Macau, the question now is whether the acquisition will meet with approval from Chinese regulators.

Herbalife Nutrition Ltd.’s 2.625% convertible notes due 2024 were also active in the secondary space following a flurry of activity surrounding the company’s soon-to-mature 2% convertible notes due Aug. 15, 2019.

Caesars in focus

Caesars’ 5% convertible notes due 2024 were in focus on Monday with the notes jumping on an outright and dollar-neutral basis as details of Eldorado’s long anticipated takeover of the company emerged.

The 5% convertible notes jumped 19 points outright to 169 early in the session.

They were seen changing hands just north of 167.25 versus an equity price of $11.41 in the mid-afternoon.

The notes gained about 2.5 points dollar-neutral and were trading up to their make-whole takeout price, a market source said.

They were a few points above parity.

Caesars stock jumped as high as $11.73 before closing the day at $11.44, an increase of 14.51%.

More than $63 million of the bonds were in play less than one hour into Monday’s session and $93 million had changed hands by the late afternoon.

The notes accounted for nearly one-third of the total reported trading volume on the tape.

While Eldorado’s buyout of Caesars was highly anticipated, the structure of the deal and whether it would trigger a make-whole takeout were in question.

Eldorado announced it would acquire Caesars in a $17.3 billion cash-and-stock deal, including debt.

Eldorado will pay $8.40 in cash and 0.0899 of a share in Eldorado common stock for each share of Caesars.

The buyout would create the largest U.S. gaming company. It was pushed for by activist investor and Caesar’s majority shareholder Carl Icahn.

The deal is expected to close in the first half of 2020, according to a company news release.

However, the deal is subject to shareholder and regulatory approval.

With interests in Macau, the question is whether it will meet with Chinese regulatory approval or become another victim of the trade war, a source said.

Herbalife active

Herbalife’s 2.625% convertible notes due 2024 were also active on Monday with the notes improving on an outright basis.

The 2.625% convertible notes traded up 1 point outright.

They were changing hands just south of 96.875 versus an equity price of $42.23 in the mid-afternoon.

There was more than $16 million in reported volume on the tape, making it second only to Caesars in trading activity.

While among the most actively traded issues during Friday’s session, Herbalife’s 2% convertible notes due 2019 were quiet on Monday.

Holders were most likely switching to the longer duration notes to stay in the name, a source said.

After rebounding from its lows last Friday, Herbalife stock traded down on Monday, closing the day at $42.20, a decrease of 3.23%.

The multi-level marketing company for dietary supplements traded to a new 52-week low of $40.75 last Friday before rebounding to close the day with a more than 5% gain.

Mentioned in this article:

Caesars Entertainment Corp. Nasdaq: CZR

Herbalife Nutrition Ltd. NYSE: HLF

Uniti Group Inc. Nasdaq: UNIT

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