Senseonics, Oil States on tap; First Majestic hits market; new paper active; Nutanix drops

By Abigail W. Adams

Portland, Me., Jan. 25 – The primary market has been busy bringing new paper into the convertibles space with conditions ripe for new supply, market sources said. “There’s a sense the good times never seemed so good,” a source said.

With rates low but on the rise and stocks at an all-time high, “companies that don’t issue convertibles now are crazy,” the source said.

Three new deals priced over the past two days, spurring activity in a convertibles space that had been relatively stagnant, and two more are in the works.

After the market close on Thursday, Senseonics Holdings, Inc. announced plans to price over $40 million of five-year convertible notes. BTIG, LLC is the bookrunner for the registered deal, which carries a greenshoe of 15%.

Oil States International, Inc. plans to price $200 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 32.5% to 37.5%.

The underwriters were using a credit spread of 350 basis points and a volatility of 33.7% for their valuation, a market source said. “I think the volatility is a little aggressive,” the source commented.

First Majestic Silver Corp. priced $150 million of five-year convertible notes prior to the market open on Thursday with a coupon of 1.875% and an initial conversion premium of 35%. The notes were up 0.5 point on an outright basis early in the session.

Insmed Inc. and Teekay Corp.’s recently priced convertible notes continued to be active their second full day on the market with both notes wrapped around 101 early in the session.

Nutanix Inc.’s recently priced 0% convertible notes due 2023 took a hit during Thursday’s session, dropping about 4 points after a JPMorgan downgrade of the company’s stock.

New supply on tap

The time is ripe for convertibles issuances and new, small-cap companies are jumping in. Senseonics plans to price over $40 million of five-year convertible notes prior to the market open on Friday.

The Germantown, Md.-based medical technology company focused on glucose monitoring products released preliminary fourth-quarter and year-end reports concurrent to the offering announcement.

Year-end revenue is expected to be $6.4 million, compared to $0.3 million in 2016. The company went public in 2016.

Senseonics will use proceeds for the commercialization of its flagship Eversense product in the United States, which is awaiting FDA approval. Eversense is approved for sale in Europe.

The secondary market is also awaiting new paper from Oil States, which is set to price $200 million of five-year notes after the market close. This is the company’s first convertible notes issuance since 2005, a good sign for the health of the convertibles market, a source said.

In their valuations, sources were paying close attention to the company’s credit and how the company will look “post forma” its recent acquisition of GEODynamics.

Proceeds from the convertible notes are being used to pay down debt under the Houston-based oilfield services company’s revolving credit facility, which was drawn on to fund the acquisition of GEODynamics.

First Majestic

First Majestic’s 1.875% convertible notes due 2023 were trading at 100.5 early in the session with First Majestic stock down 2.54%. The notes priced prior to the market open within talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 32.5% to 37.5%.

First Majestic stock continued to drop throughout the day, closing Thursday at $6.51, a decrease of 8.31%.

Day Two

New paper from Insmed and Teekay saw their second full trading day on Thursday. Insmed’s 1.75% convertible notes due 2025 were wrapped around 101 early in Thursday’s session, a market source said, with stock up about 1.5%.

While trading of the notes paled in comparison to their market debut on Wednesday, they remained active on day two.

The notes solidified around 101 throughout the session. Insmed stock ended the day at $28.15, an increase of 0.36%.

Teekay’s recently priced 5% convertible notes due 2023 were also trading around 101 early in the session, while the stock was down about 1.29%. Teekay stock continued to drop Thursday, closing the day at $8.89, a decrease of 4.41%.

Nutanix drops

While the primary market was busy preparing new deals, Nutanix’s recently priced 0% convertible notes due 2023 took a hit after a JPMorgan downgrade.

The notes were trading north of 103 on Wednesday but dropped below par and were trading in the 98 to 99 range late Thursday, a market source said.

Nutanix stock ended the day at $33.21, a decrease of 8.76%. “They got hit more than they should have,” a market source said.

Nutanix priced an upsized $500 million of five-year convertible notes on Jan. 18 with a coupon of 0%, at the rich end of talk, and with an initial conversion premium of 33%, richer than talk.

Price talk had been for a coupon of 0% to 0.5% and an initial conversion premium of 25% to 30%. The deal was heavily oversubscribed during the bookbuilding process, market sources said.

The upsized greenshoe of $75 million was fully exercised lifting the size of the deal to $575 million.

JPMorgan downgraded the San Jose, Calif.-based cloud computing software company on Thursday to underweight and set a new price target of $35 for the stock.

JPMorgan analysts say the company’s transition to a more software-oriented model could create short-term business disruptions.

Mentioned in this article:

First Majestic Silver Corp. NYSE: AG

Insmed Inc. Nasdaq: INSM

Nutanix Inc. Nasdaq: NTNX

Oil States International, Inc. NYSE: OIS

Senseonics Holdings, Inc. NYSE: SENS

Teekay Corp. NYSE: TK

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