Morning Commentary: Dermira convertibles active, steady; Crown Castle new issue on deck

By Stephanie N. Rotondo

Seattle, July 20 – A convertible bond trader said Dermira Inc. was an active name on Thursday, albeit amid overall tepid liquidity.

The trader saw the company’s 3% convertible senior notes due 2022 – a $250 million deal that priced in May – at 112.25 versus a stock price of $28.65.

He noted that the notes were at a “65 delta.”

The trader also pointed out that while the company’s equity (Nasdaq: DERM) was slightly lower, it wasn’t necessarily low enough to cause the name to trade actively, “so it’s not what is causing them to trade,” he said.

“I guess it’s just their turn,” he opined.

Another market source also saw the issue around 112.25, which was deemed about unchanged on the day.

Meanwhile, the market was waiting to see if Crown Castle International Corp.’s proposed $1.5 billion offering of series A mandatory convertible preferred stock would price at day’s end or if it would come early Friday.

An investor call was scheduled to be held at 11 a.m. ET on Thursday.

The deal was first announced on Wednesday, with price talk calling for a 7% to 7.5% yield and a 15% to 20% threshold appreciation range.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, J.P. Morgan Securities LLC, Barclays and RBC Capital Markets LLC are running the books.

The convertible preferred sale is being done alongside a $3.25 billion common stock sale. Proceeds from both offerings will be used to finance the Lightower transaction. If that deal doesn’t close, or if the purchase price is reduced, proceeds will be used for general corporate purposes, including the possible redemption of the new convertible preferreds, as well as the repurchase or repayment of debt.

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