CryoLife on tap; GSK exchangeable trades up; Allegheny below par; U.S. Steel active

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 did not stop with one deal set to price after the market close on Thursday and two more 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.

The new paper dominated activity in the secondary space.

GSK’s exchangeable was trading up on debut.

While Allegheny’s new convertible notes closed the day below par, they saw a slight dollar-neutral expansion.

Outside of recent issues, U.S. Steel Corp.’s 5% senior notes due 2026 were active as stock plunged following the company’s announcement that losses in the second quarter would be wider than previously expected.

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.

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.

While the notes were slow to trade early in the session, activity picked up as the session progressed with the notes trading well above their issue price.

The 0% exchangeable notes traded up to 110 in the late afternoon with more than $31 million in reported volume, according to a market source.

Theravance stock traded to a low of $20.80 and a high of $21.58 before closing the day at $20.98, a decrease of 3.07%.

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.

However, the notes dipped below par as the specialty metals manufacturer’s stock continued to trade off as the session progressed.

The 3.5% notes were changing hands at 99.625 in the late afternoon.

While down outright, they were expanding dollar-neutral and closed the day up 0.375 to 0.5 point on hedge.

With more than $40 million in reported volume by the late afternoon, the notes were the most actively traded name in the secondary space on Thursday.

Allegheny stock traded to a low of $10.38 and a high of $10.74 before closing the day at $10.48, a decrease of 1.87%.

Allegheny stock was down as industry peer and fellow convertible issuer U.S. Steel announced it was facing a larger-than-expected loss in the second quarter.

U.S. Steel active

U.S. Steel’s 5% senior notes due 2026 were active and “holding up well” as stock plunged on Thursday, a source said.

The 5% notes traded down about 2 points to 88 with stock off more than 11%, sources said.

The notes saw more than $12 million in reported volume during Thursday’s session.

U.S. Steel stock traded to a low of $8.09 and a high of $8.48 before closing the day at $8.15, a decrease of 13.02%.

Stock plunged after the company announced a secondary offering of 50 million shares to increase liquidity.

The company announced alongside its secondary offering that it was facing larger-than-expected losses in the second quarter due to the Covid-19 pandemic, which has idled several plants.

Losses are expected to be $315 million, which is almost double what was previously forecast, TheStreet reported.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

CryoLife Inc. NYSE: CRY

Theravance Biopharma Inc. Nasdaq: TBPH

U.S. Steel Corp. NYSE: X

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