Illumina on tap; market eyes New Mountain, FTI; Enphase Energy prices; Canopy jumps

By Abigail W. Adams

Portland, Me., Aug. 15 – The convertible primary market saw a burst of activity on Wednesday with one small deal pricing before the market open and two more set to price after the market close.

While some of Wednesday’s deals were described as “boring financial paper,” a large biotech deal is in the works for Thursday.

Illumina, Inc. plans to price $650 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% and an initial conversion premium of 37.5% to 42.5%, according to a market source.

BofA Merrill Lynch and Goldman Sachs & Co. are the bookrunners for the Rule 144A deal, which carries a greenshoe of $100 million.

Proceeds will be used to repurchase up to $150 million of common stock and may be used for the repayment of the company’s 0% convertible notes due 2019.

In an overnight deal, Enphase Energy Inc. priced $60 million of five-year convertible notes prior to the market open with a coupon of 4% and an initial conversion premium of 10%.

The small deal was slow to trade in the secondary space. However, the notes were seen up 5 points outright with stock down.

FTI Consulting Inc. plans to price $250 million of five-year convertible notes, and New Mountain Finance Corp. also plans to price $100 million of five-year convertible notes after the market close on Wednesday.

While sources pegged both deals as cheap at the midpoint of talk, the new paper comes from the finance sector, which does not have mass appeal, sources said.

Meanwhile, Canopy Growth Corp.’s 4.25% convertible notes due 2023 jumped about 13 points outright and expanded dollar-neutral on Wednesday as stock soared on news Constellation Brands was increasing its stake in the company.

Biotech names were active in the secondary space on Wednesday after seeing little trading activity on Monday.

Ligand Pharmaceuticals Inc.’s 0.75% convertible notes due 2023 and Intercept Pharmaceuticals Inc.’s 3.25% convertible notes due 2023 were both seen expanded dollar-neutral.

Enphase trades up

Enphase Energy’s $60 million of five-year convertible notes was most likely “wall-crossed” with the books already set prior to launching, sources said.

Credit Suisse Securities (USA) LLC was the bookrunner for the Rule 144A deal.

Board of directors member and stockholder Thurman John Rodgers purchased $5 million of the convertible notes in a concurrent private placement.

The energy technology company specializing in solar power has a small market cap of about $520.58 million. The small deals from small market cap companies “tend to fly under the radar,” a market source said.

However, the deal looked “stupid cheap,” a market source said. While only 3 prints were seen on the tape by the late afternoon, the notes were seen trading on a 105 handle.

The notes are not expected to see much action in the secondary space.

FTI in focus

FTI Consulting 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.

The deal is being marketed with a credit spread of 250 basis points over Libor and a 29% vol., according to a market source.

The deal looked to be about 1.75 points cheap at the midpoint of talk, a market source said. Investors liked the deal at the cheap end of talk, another source said.

FTI Consulting is a repeat issuer of convertible notes. The global business advisory firm intends to use proceeds to redeem the outstanding $300 million of its 6% convertible notes due 2022.

The notes changed hands at 102.297 on Tuesday, according to Trace data.

New Mountain eyed

New Mountain Finance plans to price $100 million of five-year convertible notes after the market close on Wednesday with a coupon of 5.5% to 5.75% and a fixed initial conversion premium of 10%.

Using a credit spread of 275 bps over Libor and a 13% vol., the deal looked to be about 1 point to 1.5 points cheap at the midpoint of talk, a market source said.

The deal from the business development company will appeal to the group of investors that play BDCs.

However, convertible paper from the financial sector does not have mass appeal, a market source said.

While the deal is expected to do well, “it’s not a screamer,” a market source said. The company has no vol. and there’s a high yield on the common, the source said.

Canopy expands

Canopy Growth’s recently priced 4.25% convertible notes due 2023 were up on an outright and dollar-neutral basis as stock skyrocketed on Wednesday.

While many tried to get in on the action early in Wednesday’s session, there is no borrow on the stock, making the notes hard to trade, a market source said.

While the notes were active, they did not trade as much as expected, another source said.

The 4.25% notes were seen at 107 bid, 109 offered versus an equity price of C$41.40.

They were quoted at 108 at the market close, an increase of about 13 points from Tuesday’s closing price of 94.89, according to a market source.

The notes expanded dollar-neutral, a source said.

Canopy priced C$500 million of the 4.25% notes in a Rule 144A and Regulation S deal in mid-June with the convertible notes tied to the company’s stock on the Toronto exchange.

The medical and recreational marijuana company’s stock surged more than 30% on both the Toronto and New York Stock Exchange after Constellation Brands, a producer and marketer of beer, wine and spirits, announced it was taking a 38% stake in the company.

Canopy stock closed at C$42.20, an increase of 31.26%, on the Toronto Exchange and $32.11, an increase of 30.42%, on the NYSE.

Constellation Brands was also an initial purchaser of the 4.25% convertible notes, buying C$200 million of the C$500 million offering, Prospect News reported.

Biotech active

Ligand’s recently priced 0.75% convertible notes due 2023 “finally caught a bid,” a market source said.

The notes were seen expanded 1 point over the past week and traded up to a new high on an outright basis.

The convertible notes were seen settling around 113.5 on Wednesday after trading as high as 116 on Tuesday.

Ligand stock closed Wednesday at $247.67, a decrease of 0.58%. However, Ligand stock has been on the rise since Monday when the company announced it had acquired Vernalis, a U.K.-based biotech company, for $43 million.

Intercept Pharmaceuticals’ 3.25% convertible notes due 2023 were also expanding dollar-neutral in active trading on Wednesday as the company’s stock slid more than 8%.

The 3.25% notes dropped about 2 points outright to trade around 93. They were seen up about 0.75 point dollar-neutral.

Intercept stock closed Wednesday at $102.21, a decrease of 8.45%. RBC Capital downgraded Intercept to sector perform from outperform on Wednesday while maintaining its $115 price target.

Mentioned in this article:

Canopy Growth Corp. TSE: WEED

Enphase Energy Inc. Nasdaq: ENPH

FTI Consulting Inc. NYSE: FCN

Illumina, Inc. Nasdaq: ILMN

Intercept Pharmaceuticals Inc. Nasdaq: ICPT

New Mountain Finance Corp. NYSE: NMFC

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