New Nevro trades up out of the chute, shares higher; Tutor Perini launches new issue

By Rebecca Melvin

New York, June 8 – The U.S. convertibles primary market continued to revive on Wednesday with a new issue trading up during the session after being released for secondary dealings and a new issue launching after the market close for pricing on Thursday.

Nevro Corp.’s newly priced 1.75% convertibles traded up on their debut in the secondary market after the Redwood City, Calif.-based medical device company priced an upsized $150 million of the five-year senior notes at the rich end of talked terms.

The new Nevro convertibles were seen at 105 last, with shares up about 5.5%. Earlier in the session, the notes had been around 104 with the shares up 3%.

The new bond was better on a dollar-neutral, or hedged, basis, a market source said, having traded at 103 and north of 103 right out of the chute.

After the market close, Tutor Perini Corp. launched an offering for $125 million of five-year convertible senior notes that were being talked at a 3.25% to 3.75% coupon and 32.5% to 37.5% initial conversion premium. The Rule 144A bonds were expected to price late on Thursday.

Back in established issues, AK Steel Holding Corp.'s 5% convertibles were indicated higher by more than 10 points as shares of the West Chester, Ohio-based steel products maker surged following an analyst’s upgrade.

The AK Steel bonds were indicated better at 123.5, which was up from 110.5 previously, according to a pricing source.

Shares of the steel maker jumped 77 cents, or 17%, to $5.35. Credit Suisse analysts raised its rating on the stock to “outperform” from “underperform,” and also doubled its share price target to $7.00 per share from $3.50 per share.

Credit Suisse said the price target increase was motivated by expectations for better pricing and sales for its products and alleviated liquidity concerns following a recent equity offering.

Elsewhere, Weatherford International Ltd.’s 5.875% exchangeables traded up 0.5 point to a point amid higher oil prices. The new exchangeable, which debuted in the market last week, traded at 119.25, which was up from about 118.7 on Tuesday. Weatherford common shares were down in early trading at $6.54, which was off 18 cents, or 2.6%.

The price of crude oil for the West Texas Intermediate front month was up 1.9% at $51.29 per barrel on the New York Mercantile Exchange.

Medicines Co.’s new 2.75% convertibles, which debuted in the market on Tuesday, were 0.25 point to 0.5 point higher, changing hands at 103.785, according to Trace data.

Shares of the Parsippany, N.J.-based health care company closed up 0.7 point to $38.32.

New Nevro adds on swap

The new Nevro convertible did well on its debut in the convertibles market, a syndicate source said.

Shares of the medical device maker closed up $3.98, 5.5%, to $76.71.

The bonds were appealing to investors for a number of reasons including tenor, sector, pricing and for credit strength.

The registered deal was upsized to $150 million from an initially talked $125 million.

Proceeds will be used to fund the net cost of the call spread and to repay an existing term loan agreement, including associated closing and repayment fees with Capital Royalty Partners and certain affiliates. Any remaining proceeds are for general corporate purposes, which may include continuing commercialization of its Senza spinal cord stimulation product, funding research and development and increasing working capital.

JPMorgan and Morgan Stanley are the joint bookrunners for the offering, for which there is a greenshoe for up to an additional $18.75 million of notes.

Redwood City, Calif.-based Nevro is a medical device company focused on chronic pain treatments.

Tutor Perini on tap

Tutor Perini, Los Angeles-based general contracting and construction management company, launched an offering of $125 million of five-year convertible senior notes after the market close on Wednesday that was talked to yield 3.25% to 3.75% with an initial conversion premium of 32.5% to 37.5%, according to market sources.

The Rule 144A offering has a greenshoe for up to $18.75 million additional notes and was being sold via joint bookrunners Goldman Sachs & Co. and SunTrust Robinson Humphrey Inc.

The notes are non-callable for three years and are provisionally callable thereafter if shares exceed 130% of the conversion price. There are no investor puts, and they will be settled in shares or cash or a combination of shares and cash.

Proceeds are being used to repay a portion of borrowings outstanding on bank facilities, including the company’s term loan and revolving credit facility, and for general corporate purposes.

In connection with the offering, the company entered into a consent and second amendment to its credit facility, amending certain covenants to permit the company to perform its obligations under the convertible notes.

Mentioned in this article:

AK Steel Holding Corp. NYSE: AKS

Medicines Co. Nasdaq: MDCO

Nevro Corp. Nasdaq: NVRO

Tutor Perini Corp. NYSE: TPC

Weatherford International plc NYSE: WFT

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