Morning Commentary: Post-holiday convertible bond trading subdued; Intercept’s new issue quiet

By Stephanie N. Rotondo

Seattle, July 5 – After rising on Friday, the convertible bond market came back after the long holiday weekend to a weaker tone.

“The way Europe was down, we were going to be down regardless,” a trader said. The Dow Jones industrial average traded down at least 100 points on Tuesday. The S&P 500 index and the Nasdaq Global Select Market was also trading lower.

The day’s declines came as European stocks got hammered. Investors there pushed down the market as concerns about slowing economic growth – especially amid the United Kingdom’s election to leave the European Union – grew.

But given the weakness – and the fact that it was July 5 – liquidity in the convertibles space was limited.

“July 5th is always a dead day,” one trader said. “People take this week off.”

The trader pointed out that even Intercept Pharmaceuticals Inc.’s $400 million of 3.25% convertible notes due 2023 were not moving much.

That issue came Thursday, with an initial conversion premium of 32.5%, according to a pricing term sheet.

The registered deal priced at the midpoint of talk for a 3% to 3.5% coupon and 30% to 35% premium.

There is a $60 million greenshoe for the deal that was sold via joint bookrunners RBC Capital Markets LLC, UBS Investment Bank, BofA Merrill Lynch, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC.

The equity (Nasdaq: ICPT) was off $1.60, or 1.1%, at $144.76 on Tuesday.

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