Morning Commentary: CryoLife on tap; GSK exchangeable prices rich; Allegheny trades up

By Abigail W. Adams

Portland, Me., June 18 – The convertibles primary market slowed its pace over the past week.

While a far cry from the heavy volume seen in previous weeks, the new deal flow on Wednesday has not stopped. One deal is launching prior to the market open and two more are making their aftermarket debut.

CryoLife Inc. plans to price $100 million of five-year convertible notes after the market close on Thursday.

The small offering looked cheap based on underwriters’ assumptions, sources said.

However, its audience will be limited due to the small size of the offering and the small market cap of the company.

Allegheny Technologies Inc. priced an upsized offering of $285 million of five-year convertible notes, and GSK Finance No. 3 plc, a subsidiary of GlaxoSmithKline plc, priced $280 million of three-year notes (expected A2/A) exchangeable for Theravance Biopharma Inc. stock after the market close on Wednesday.

New paper from Allegheny dominated activity in the secondary space and was trading up on debut.

CryoLife eyed

CryoLife plans to price $100 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3.75% to 4.25% and an initial conversion premium of 35% to 40%, according to a market source.

The deal was heard to be marketed with assumptions of 800 basis points over Libor and a 37% vol.

Using those assumptions, the deal looked about 4.8 points to 4.9 points cheap at the midpoint of talk, sources said.

However, the audience for the small offering is expected to be limited, a source said.

Allegheny expands

Allegheny Technologies priced an upsized $285 million of five-year convertible notes after the market close on Wednesday at the cheap end of talk with a coupon of 3.5% and an initial conversion premium of 45%.

Price talk was for a coupon of 3% to 3.5% and an initial conversion premium from 40% to 45%.

The new paper dominated activity in the secondary space and was trading up on debut.

The 3.5% notes were marked at 100.5 bid, 101 offered versus a stock price of $10.67 early in the session, according to a market source.

Allegheny stock was changing hands at $10.62, a decrease of 0.56%, shortly before 11 a.m. ET.

GSK in demand

GSK Finance No. 3, a subsidiary of GlaxoSmithKline priced $280 million of three-year notes (expected A2/A) exchangeable for Theravance Biopharma stock after the market close on Wednesday with a coupon of 0%, an initial exchange premium of 35% and a reoffer price of 108.5.

Pricing came in line with talk for a fixed coupon of 0% and a fixed initial exchange premium of 35% and at the rich end of talk for a reoffer price of 106.5 to 108.5, according to a market source.

The initial size of the offering was $300 million. However, the final deal size was $280 million, due to the lowered market value of GSK’s Theravance shares.

The notes will be exchangeable into all of the 9,644,807 shares of Theravance currently owned by GSK.

The deal played to strong demand from outright accounts, a market source said.

European investors in need of investment grade paper led the demand, another source said.

The notes were slow to trade early in the session. “They were well placed,” a source said.

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