Morning Commentary: Egalet exchanges; Micron surges on earnings; tax changes for Christmas

By Abigail W. Adams

Portland, Me., Dec. 20 – Egalet Corp. issued $23.9 million in seven-year convertible notes to yield 6.5%, up 15%, in an exchange transaction announced prior to the market open Wednesday but it is doubtful the new notes will trade, a market source said.

The exchange was an agreement with holders of $36.4 million of Egalet’s 5.5% convertible notes due 2020.

The new notes carry a higher coupon and a drastically reduced conversion price of $1.33 a share, versus the $14.87 conversion price on the 5.5% notes.

Egalet is also issuing a warrant for 3.5 million shares in the exchange.

The company still needs stockholder approval. If stockholders reject the new shares to be issued on the conversion of the 6.5% notes, the coupon will increase to 10%, Prospect News reported.

“It’s definitely on the tape and it’s happening, but I don’t know if the new notes will trade,” a market source said.

The 5.5% notes from the specialty pharmaceutical company specializing in abuse-resistant pain medication were stagnant in the market. There were some “odd-lot trades” of the notes in the mid-40s, but they generally were at 50 bid, 55 offer, a market source said.

“But they never traded,” the source said. “It was hard to find offers.”

The company’s stock tanked in early trading Wednesday with stock at $1.07 in early trades, a decrease of 8.19%.

Micron Technology Inc.’s 3% convertible notes due 2043 were in focus after the company released stronger than expected first quarter earnings report after market close Tuesday. The notes were trading up to their previous level before the company got caught in the late November sell off of semiconductor stock.

The notes gained about 6 points in early trades to reach 159, according to Trace data. The notes were trading in the 160 range before the sell off.

Micron stock was up 3.56% in early trades at $45.54. The Boise, Idaho-based memory chip maker reported an adjusted EPS of $2.45 a share in their first quarter earnings report, which beat analyst expectations for an adjusted EPS of $2.20.

Micron is expecting an adjusted EPS of $2.58 per share for the second quarter on sales of $7 billion, which is at the midpoint of its future guidance. Analysts had been anticipating $2.58 a share on sales of $6.08 billion.

The long-delayed tax vote is expected to happen Wednesday with the U.S. House of Representatives again taking up the Senate’s revised bill. Some market sources are hopeful the bill will be the catalyst for the new issuance the convertible market has been waiting for. Others are not so sure.

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