FTI Consulting on tap; Microchip has its volatility event; Booking active; Insmed down

By Abigail W. Adams

Portland, Me., Aug. 14 – With trading volume light in the secondary space, all eyes have been on the primary market to see what the week will bring for new paper. Many were expecting some small deals to come forward.

And after the market close on Tuesday, one small deal was announced.

FTI Consulting Inc. plans to price $250 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 30% to 35%, according to a market source.

J.P. Morgan Securities LLC and BofA Merrill Lynch are the joint bookrunners for the Rule 144A deal, which carries a greenshoe of $37.5 million.

Proceeds will be used to redeem the outstanding $300 million of the company’s 6% convertible notes due 2022.

Meanwhile, trading volume remained light in the secondary market with about $45 million on the tape early in the session and $285 million in the mid-afternoon.

Microchip Technology Inc.’s convertible notes have seen an expansion since volatility hit the semiconductor company’s stock post first-quarter earnings last Friday.

As the convertible notes dropped alongside stock to new outright levels, they were up 0.75 point to 1 point dollar-neutral, a market source said.

Booking Holdings Inc.’s 0.9% convertible notes due 2021 were volume leaders on Tuesday with the notes trading largely sideways with stock off slightly.

The notes have been active and dropping alongside stock on an outright basis since the online travel booking company reported second-quarter earnings.

Caesars Entertainment Corp.’s 5% convertible notes due 2024 were active early in Tuesday’s session with stock up, but trading tempered as stock came in later in the session.

Insmed Inc.’s 1.75% convertible notes due 2025 returned to the 85 range on Tuesday after a rebound in June which saw the notes trade above par for a short time.

Microchip’s volatility event

Microchip’s convertible notes have expanded as the company’s stock has come under pressure in the wake of its first-quarter earnings report on Friday.

Microchip’s 1.625% convertible notes due 2027 and 2.25% convertible notes due 2037 were expanded by about 1 point on a dollar-neutral basis, a market source said.

Microchip’s 1.625% convertible notes due 2025 were up about 0.5 point to 0.75 point dollar-neutral.

“They finally made some guys money” on a hedged basis, the source said. “People were waiting for a volatility event, and we had it.”

The 1.625% notes due 2027 traded down about 3 points outright to 110 on Tuesday. The 2.25% notes were also down about 3 points outright to 112.5, according to Trace data.

The 1.625% notes due 2025 were down about 7 points to 160.

Microchip stock closed Tuesday at $84.08, a decrease of 3.39%.

While trading slowed on Tuesday, Microchip’s convertible notes have been active and dropping alongside stock since the company reported its first-quarter earnings after the market close Aug. 9.

Microchip’s stock has dropped about 14% since the earnings report.

While Microchip posted a second-quarter earnings beat, the company also disclosed problems with accounting practices at recently acquired Microsemi, which caused the company to lower its sales guidance.

Microchip also warned that trade war tensions with China would impact its chip sales.

Booking leads volume

Booking’s 0.9% convertible notes due 2021 saw high-volume activity on Tuesday with the notes slipping about 1 point outright with stock off slightly.

The notes were seen changing hands at 113.875 on an outright basis but closed the day around 112.875. Booking’s stock continued to lose ground on Tuesday, closing the day at $1,833.55, a decrease of $20.71, or 1.12%.

The convertible notes have also been active and trading down alongside stock since reporting second-quarter earnings on Aug. 9.

While Booking reported a second-quarter earnings beat, the stock has traded down on lower-than-anticipated third-quarter guidance.

The notes have dropped about 6 points outright with stock down about 10% since Booking’s earnings report.

Caesars active

Caesars’ 5% convertible notes due 2024 were the most actively traded early in Tuesday session, but activity tempered as the stock dropped off into the afternoon.

The equity sensitive bonds were trading outright at 158 with stock up about 1% in early trading on Tuesday, a market source said.

Caesars stock closed Tuesday at $9.60, a decrease of 1.54%.

The 5% notes were rumored to be the target of a potential buyback. However, there have been no updates about the future of the notes, a market source said.

Insmed drops

Insmed’s struggling 1.75% convertible notes due 2025 returned to the 85 range on Tuesday after a brief rebound which saw the notes trade up to par.

The notes were down about 1.5 points outright to trade largely around 85.5. Insmed stock closed Tuesday at $21.02, a decrease of 3.89%.

The 1.75% notes have struggled since hitting the market in late January with the notes trading in the 85 range in late March and early April.

However, the notes rebounded on an outright basis and traded above par for a brief period in June.

The notes were volatile on Aug. 3 in the run up to an FDA panel review of the company’s new drug ALIS with trades as high as 104 before the 1.75% notes closed the day just south of par.

While the FDA panel approved the safety and effectiveness of ALIS for patients with limited to no treatment options in a 12-2 vote, the panel voted against the safety of ALIS in the broadest population of adult patients, according to a company news release.

Insmed’s stock and convertible notes have slid since the Aug. 7 decision.

Mentioned in this article:

Booking Holdings Inc. Nasdaq: BKNG

Caesars Entertainment Corp. Nasdaq: CZR

FTI Consulting Inc. NYSE: FCN

Insmed Inc. Nasdaq: INSM

Microchip Technology Inc. Nasdaq: MCHP

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