What are the pricing terms and yields on the new 2029 Senior Subordinated Secured Notes compared to the original 2026 Convertible Senior Notes?
Pricing and Yield Comparison
LivePerson’s deleveraging transaction swaps the outstanding 2026 Convertible Senior Notes (‑ $341.1 mm) for three components: $45 mm in cash, $115 mm of newly‑issued 2029 Senior Subordinated Secured Notes, and an equity stake. The press release does not disclose a specific coupon or issue price for the 2029 notes, but the structure of the exchange—cash plus a sizable equity component—suggests that the 2029 notes were issued at a sub‑par price (i.e., a discount to face value) to compensate holders for the longer‑dated, unsecured‑subordinated nature of the instrument. By contrast, the 2026 Convertible Senior Notes were originally priced at par with a low‑coupon (typical for convertibles in the 0.5‑1.0 % range) and a conversion premium that embedded a modest yield for noteholders.
Because the 2029 Senior Subordinated Secured Notes carry a longer maturity (13 years vs. 7 years) and rank below the existing senior debt, the market will price them at a higher effective yield than the 2026 convertibles. Assuming a discount of roughly 5‑7 % to face value and a mid‑single‑digit coupon (≈ 5‑6 %), the resulting yield‑to‑maturity on the 2029 notes would be in the high‑6 % to low‑7 % range, comfortably above the 2026 convertible’s yield (which would have been under 2 % when accounting for the conversion feature).
Trading Implications
- Yield‑seeking investors may view the 2029 notes as an attractive, higher‑coupon opportunity, especially if the discount is sizable; however, the subordinated and unsecured status adds credit‑risk premium, so a tighter spread to comparable senior debt is warranted.
- Convertible‑oriented holders who valued the upside of conversion to equity now receive a longer‑dated, fixed‑rate claim plus equity exposure, effectively shifting their risk profile from equity‑linked upside to a higher‑yield, longer‑duration fixed‑income position.
- Actionable stance: If you currently own the 2026 convertibles, the exchange offers a modest cash return and a higher‑yield note that may suit a more conservative, income‑focused allocation. For new buyers, the 2029 notes should be priced against the senior unsecured curve, with a spread of roughly 300‑400 bps to account for the subordinated position; any pricing tighter than that could present a relative value buy, while a wider spread would signal heightened credit concerns.