Morning Commentary: Clovis Oncology launches $200 million offering; deal looks ‘cheap’

By Abigail W. Adams

Portland, Me., April 16 – After a week with no convertible deals pricing, a new offering is in the pipeline.

Clovis Oncology, Inc. plans to price $200 million of seven-year convertible notes after the market close on Monday with price talk for a coupon of 1% to 1.5% and an initial conversion premium of 35% to 40%, according to a market source.

The convertible note offering is being made concurrently with an offering of $100 million of common stock.

The deal is being marketed with a credit spread of 350 basis points and a 42% vol., a market source said. The deal modeled about 4 points cheap with those inputs. However, sources questioned those inputs.

“It seems aggressive,” a market source said. Using a credit spread of 400 bps and a 40% vol., the deal modeled about 1.5 points cheap, the source said.

“Normally, you don’t do 40% vol. for seven-year paper,” a market source said. The company does have good vol., “but I don’t know about 40%,” the source said.

As the primary market prepares new paper, the secondary market was its typical Monday self with not much on the tape early in the session, sources said.

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