Morning Commentary: Danimer convertibles offering in focus; Ford notes, stock active

By Abigail W. Adams

Portland, Me., Dec. 16 – The convertibles primary market stood poised to cap an active week for new issuance with one more offering.

Danimer Scientific, Inc. plans to price $175 million of five-year convertible notes after the market close on Thursday.

While the deal modeled several points cheap based on underwriters’ assumptions, the company was highly speculative and issues with the borrow are expected.

Meanwhile, equity markets were mixed early Thursday with high-flying growth stocks continuing to underperform as the market digested the Federal Reserve’s new timeline for the rollback of pandemic-era stimulus.

The Dow Jones industrial average was up 247 points, or 0.69%, the S&P 500 index was up 0.21% and the Russell 2000 index was up 0.67% shortly before 11 a.m. ET.

However, the Nasdaq Composite was down 0.56%.

Ford Motor Co.’s 0% convertible notes due 2026 were in focus early in the session with the notes gaining outright alongside stock.

Danimer eyed

Danimer plans to price $175 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 25% to 30%.

The deal was heard to be in the market with assumptions of 650 basis points over Libor and a 40% vol., a source said.

The Bainbridge, Ga.-based biopolymer manufacturer is a highly speculative company with an $878 million market cap and short interest of almost 15%, a source said.

Valuations for such highly speculative companies are difficult given the variations in the borrow rate, the source said.

Assuming a normal borrow, the deal looked 8 points cheap at the midpoint of talk.

However, deals that model that cheap tend to have issues with the borrow, which will decrease the fair value of the deal, sources said.

Danimer is poised to be the second deal of the week to price a convertible note after hitting its 52-week low.

Stock hit its 52-week low of $8.52 early in the session. It was changing hands at $8.86, a decrease of 16.13%, shortly before 11 a.m. ET.

Stock was at its all-time high of $66.30 in February.

Ford active

Ford’s 0% convertible notes due 2026 were in focus early in the session with the notes gaining alongside stock.

The 0% notes were up about 2.75 points outright as stock gained 4%.

They were changing hands at 137.5 versus a stock price of $21.10 about one hour into the session.

There was $11 million in reported volume.

Ford’s stock was changing hands at $21.01, an increase of 4.11%, shortly before 11 a.m. ET.

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