Morning Commentary: Prospect Capital slips ahead of earnings; Innoviva’s recent 2.5% notes firm

By Stephanie N. Rotondo

Seattle, Aug. 23 – While convertible bond market trading remained thin early Wednesday, investors were looking ahead.

As such, Prospect Capital Corp.’s 4.95% convertible notes due 2022 were in play, falling nearly a point to 98.75, according to a market source.

The underlying stock (Nasdaq: PSEC) was only slightly weaker, slipping 3 cents to $7.25.

The New York-based business development company is scheduled to release its quarterly results on Monday. Investors are predicting that the company will slash its common stock dividend as net investment income has not been enough to cover payments for the last three quarters.

Meanwhile, Innoviva Inc.’s 2.5% convertible notes due 2025 were on the rise, adding about ˝ point to trade at 98.165, a source said.

The company’s shares (Nasdaq: INVA) were up 22 cents, or 1.75%, to $12.80.

On Monday, the Brisbane, Calif.-based biopharmaceutical company said it had successfully wrapped a refinancing of its 9% fixed-rate term notes due 2029. Innoviva was able to do so by securing a new $250 million term loan B, as well as selling $192.5 million of the 2.5% convertibles.

The company initially priced $175 million of the notes on Aug. 2 with an initial conversion premium of 30%. On Aug. 7, it was announced that a $17.5 million greenshoe had been fully exercised, bringing the total amount outstanding to $192.5 million.

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