Tabula Rasa convertibles expand on debut; Avadel tanks on bankruptcy news; Zendesk up

By Abigail W. Adams

Portland, Me., Feb. 8 – New paper hit the convertibles secondary space on Friday, dominating trading activity.

In an overnight deal, Tabula Rasa Healthcare Inc. priced an upsized $285 million of seven-year convertible notes prior to the market open. The new paper was expanding on debut.

While the new paper was in focus, the secondary space was active with several names seeing large movements.

Avadel Pharmaceuticals plc’s 4.5% convertible senior notes due 2023 tanked on news one of its units filed for Chapter 11 bankruptcy protection with the notes contracting as much as 15 points dollar-neutral.

Zendesk Inc.’s 0.25% convertible notes due 2023 continued to improve during Friday’s session with stock again on the rise following a recently reported earnings beat.

Tabula Rasa expands

Tabula Rasa priced an upsized $285 million of seven-year convertible notes on Friday at par at the rich end of talk with a coupon of 1.75% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The greenshoe was also upsized to $40 million. The initial size of the deal was $250 million with a greenshoe of $37.5 million.

The deal was heard to be in demand during bookbuilding and was performing well on its secondary market debut.

The new 1.75% convertible notes were trading between 101.5 and 102 early in the session with stock largely unchanged early in the session, a market source said.

They were seen changing hands around 101.875 in the mid-afternoon.

The notes were expanded about 2 points dollar-neutral, a market source said.

“They did well,” a market source said.

There was a good mix of outright and swap trades, a source said.

The new paper dominated activity in the secondary space with more than $40 million on the tape less than an hour into Friday’s session and more than $150 million on the tape by the late afternoon.

Tabula Rasa stock was largely flat on Friday closing the day at $52.81, an increase of 0.04%.

Avadel plummets

Avadel’s 4.5% convertible notes due 2023 were the major loser of Friday’s session with the notes tanking on both an outright and dollar-neutral basis after subsidiary Avadel Specialty Pharmaceuticals, LLC filed for Chapter 11 bankruptcy.

The 4.5% notes dropped 10 points outright and were contracted as much as 15 points dollar-neutral, sources said.

The 4.5% convertible notes were changing hands at 62.5 versus an equity price of $2.27. More than $7.5 million of the bonds were on the tape by the late afternoon.

Avadel stock closed Friday at $2.27, a decrease of 10.28%.

The company announced on Thursday its subsidiary Avadel Specialty Pharmaceuticals had filed for bankruptcy as part of the company’s restructuring plan.

The restructuring plan will involve exiting Noctiva, which Avadel Specialty Pharmaceuticals was responsible for marketing, to focus on a product that is in phase 3 development for the treatment of excessive daytime sleepiness and cataplexy, or muscle weakness brought on by strong emotion, Prospect News reported.

The bankruptcy filing does not trigger a default or violate covenants on the 4.5% notes, the company said.

Avadel priced $143.75 million of the 4.5% notes in February 2018.

Zendesk improves

Zendesk’s 0.25% convertible notes due 2023 continued to improve on both an outright and dollar-neutral basis on Friday with stock continuing its upward momentum.

The notes were up about 6 points outright. They were changing hands at 134.5 versus an equity price of $75.77 in the mid-afternoon, according to a market source.

More than $11.5 million of the bonds were on the tape during Friday’s session.

Zendesk stock closed Friday at $76.38, an increase of 4.24%.

Stock has been on the rise since the company reported a large fourth-quarter earnings beat on Wednesday.

While the 0.25% notes saw large outright gains on the stock move on Wednesday, they were contracted 0.5 point to 0.75 point dollar-neutral.

However, the notes were improved on Wednesday with better buyers in the market, a source said.

Mentioned in this article:

Avadel Pharmaceuticals plc Nasdaq: AVDL

Tabula Rasa Healthcare Inc. Nasdaq: TRHC

Zendesk Inc. NYSE: ZEN

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