Convertible debt investors eye recent deals from II-VI, Jazz; hurricanes pressure insurers

By Stephanie N. Rotondo

Seattle, Sept. 5 – With no new issues entering the market in the first day of trading after a long holiday weekend, convertible bond investors were eyeing deals priced in August on Tuesday.

For instance, II-VI Co.’s 0.25% convertible senior notes due 2022 were inching higher in early dealings, according to a market source.

By the end of the day, however, the paper was seen ending slightly lower.

At the bell, a source placed the issue around 105.25, which compared to 106.75 at the open.

Earlier in the day, another source saw the paper edging up toward 107.25 against a stock price of $36.90.

Like the bonds, the company’s equity was on the lower side, declining 95 cents, or 2.57%, to $35.95.

The $300 million deal priced Aug. 23 with an initial conversion premium of 33.5%. On Aug. 29, the company said its $45 million greenshoe had been exercised in full, bringing the total amount outstanding to $345 million.

BofA Merrill Lynch was the bookrunner.

Meanwhile, Jazz Pharmaceuticals plc’s 1.5% exchangeable senior notes due 2024 were holding around the 99 mark, a source reported.

Another source agreed that the bonds were about unchanged, seeing the notes straddling 99.

The company’s stock was a touch better on the day, adding a nickel to close at $147.92.

The company sold $500 million of the notes on Aug. 18 via a Rule 144A offering led by Morgan Stanley & Co. LLC. On Friday, the company said its $75 million over-allotment option had been fully exercised, lifting total issuance to $575 million.

The deal came at a discounted price of 97, with an initial conversion premium of 50%.

Away from the recent deals, insurance companies were starting to enter the radar as Hurricane Irma appeared poised to hit Florida.

Irma is coming in the wake of Hurricane Harvey, which battered parts of Texas and the Gulf Coast.

The storms have not only done physical damage, but have also put considerable pressure on insurer stocks.

For instance, Heritage Insurance Holdings Inc.’s equity dropped nearly 17% in Tuesday trading alone, ending the day at $9.35. The company’s 5.875% convertible notes due 2037 were following suit, falling to levels just shy of 92.

That compared to previous trades around 99.75, a market source said.

At another desk, a source said the convertibles were about 8 points lower at 91.99.

Mentioned in this article:

Heritage Insurance Holdings Inc. NYSE: HRTG

II-VI Co. Nasdaq: IIVI

Jazz Pharmaceuticals plc Nasdaq: JAZZ

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