Dermira active, steady; HubSpot trends up; Ensco drifts lower; Crown Castle deal eyed

By Stephanie N. Rotondo

Seattle, July 20 – Convertible bonds were moving in line with their underlying equities on Thursday, as there was little in the way of news to move markets.

However, liquidity continued to be limited, market sources noted.

One trader said Dermira Inc. was an active name, seeing the company’s 3% convertible senior notes due 2022 – a $250 million deal that priced May 10 – at 112.25 versus a stock price of $28.65.

He noted that the notes were at a “65 delta.”

The trader also pointed out that while the company’s equity was slightly lower, it wasn’t necessarily low enough to cause the name to trade actively, “so it’s not what is causing them to trade,” he said.

“I guess it’s just their turn,” he opined.

Another market source also saw the issue hitting lows around 111.825, which was down from 112.25 previously.

The stock closed at $28.60, down 35 cents, or 1.21%.

HubSpot Inc.’s 0.25% convertible notes due 2022 – a $350 million issue that priced May 5 – were meantime trending upward, even as its stock finished a touch weaker.

A trader noted that the “stock was up a little bit” earlier in the day, which helped push the bonds up to a 104 to 104.25 context.

“People are just buying the put, I’m sure,” he said.

Another source saw the issue at 104.25, which was up from 103 to 103.5 previously.

The underlying equity waned 15 cents to $73.95.

Another busy name was Ensco plc, as its 3% convertible notes due 2024 “came in a little bit,” according to a trader.

The trader said the paper started the day around 81, though it dipped to 80.375.

A second source placed the issue at 80.625, which was called unchanged to off 0.25 point.

Ensco’s shares fell 23 cents, or 4.04%, to $5.46.

The weakness in the stock – as well as the activity in the bonds – came amid reports that some bondholders are not pleased with the company’s planned acquisition of Atwood Oceanics Inc.

The all-stock transaction was announced on May 30. Under the deal, Ensco will pay off all of Atwood’s $1.3 billion in debt, which will take up most of Ensco’s $1.1 billion of available cash.

Meanwhile, the market was waiting to see if Crown Castle International Corp.’s proposed $1.5 billion offering of series A mandatory convertible preferred stock would price at day’s end or if it would come early Friday.

An investor call was held at 11 a.m. ET on Thursday.

After the call, a trader said the bonds were bid at 100.25 in the gray market.

Ahead of the deal’s pricing, the company’s stock was down $1.39, or 1.41%, at $97.27.

Pricing details were not available as of 6 p.m. ET.

The deal was first announced on Wednesday, with price talk calling for a 7% to 7.5% yield and a 15% to 20% threshold appreciation range.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, J.P. Morgan Securities LLC, Barclays and RBC Capital Markets LLC are running the books.

The convertible preferred sale is being done alongside a $3.25 billion common stock sale. Proceeds from both offerings will be used to finance the Lightower transaction. If that deal doesn’t close, or if the purchase price is reduced, proceeds will be used for general corporate purposes, including the possible redemption of the new convertible preferreds, as well as the repurchase or repayment of debt.

Mentioned in this article:

Crown Castle International Inc. NYSE: CCI

Dermira Inc. Nasdaq: DERM

Ensco plc NYSE: ESV

HubSpot Inc. NYSE: HUBS

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