JPMorgan on tap; Clovis contraction continues; Insmed improves; Ctrip.com, NXP active

By Abigail W. Adams

Portland, Me., April 23 – The convertibles space was off to a sluggish start on Monday with the $1.07 billion in new paper that entered the space last week slow to trade.

While last week’s deals drifted out of focus, JPMorgan Chase Financial LLC plans to price $600 million of five-year cash-settled equity-linked notes tied to Voya Financial Inc. stock after the market close on Tuesday.

The deal is JPMorgan’s second offering of cash-settled equity-linked notes tied to Voya. JPMorgan’s most recent deal will mark the fourth offering of cash-settled equity-linked notes tied to Voya in recent months.

Clovis Oncology Inc.’s recently priced 1.25% convertible notes due 2025 continued their contraction on Monday with the notes down another 0.25 point on a dollar-neutral basis, a market source said.

Ctrip.com International Ltd.’s 1% convertible notes due 2020 and 1.99% convertible notes due 2025 were among the most actively traded of the day although with little change in outright prices.

NXP Semiconductors NV’s 1% convertible notes due 2019 remained active in the space on Monday as Qualcomm’s long-delayed acquisition of the company faces another hurdle.

Insmed Inc.’s 1.75% convertible notes due 2025 were up on an outright basis as the biotech company’s stock surged more than 10% after a Credit Suisse upgrade.

While trading volume in the convertible space was light on Monday with only $290 million on the tape by late afternoon, earnings reports will start to come in this week, which is expected to spur trading volume.

JPMorgan’s second synthetic

JPMorgan plans to price its second offering of five-year cash-settled equity-linked notes tied to Voya Financial after the market close on Tuesday.

Price talk is for a coupon of 0% to 0.25% and an initial conversion premium of 30% to 35%, according to a market source.

JPMorgan priced its first offering of $350 million of five-year cash-settled convertible notes linked to Voya on Jan. 31 with a coupon of 0.25% and an initial conversion premium of 32.5%.

Pricing of those notes came at the middle of talk for a coupon of 0% to 0.5% and at the cheap end of talk for an initial conversion premium of 32.5% to 37.5%.

The 0.25% notes have traded below par for much of April and were last seen trading at 99.75 on Monday, according to Trace data.

The notes were trading up to 104 but dropped to par after Deutsche Bank AG, London Branch priced its offering of cash-settled equity-linked notes tied to Voya in March.

JPMorgan’s 0.25% notes did not carry takeover protection, which sources pointed to as the reason the notes traded down.

Deutsche Bank’s 1% cash-settled notes tied to Voya traded just north of 102 during Monday’s session, according to Trace data.

BofA Finance LLC also priced an offering of cash-settled equity-linked notes tied to Voya in early April.

BofA’s 0.25% cash-settled notes tied to Voya were a major volume mover during Monday’s session with more than $10 million bonds on the tape.

The notes were up slightly to trade at 99.875.

The abundance of offerings of cash-settled notes tied to Voya is an effort to monetize the warrants that were distributed after ING Group’s divestment of the company, market sources said.

While there is takeover protection for Deutsche’s and BofA’s cash-settled equity-linked notes, it is only partial takeover protection and leaves hedge accounts vulnerable, a market source said.

Voya has long been rumored to be a potential takeover target. JPMorgan’s new offering does carry takeover protection and is guaranteed by JPMorgan Chase & Co.

Clovis contracts

Clovis Oncology’s 1.25% convertible notes due 2025 continued to contract during Monday’s session. The notes were down another 0.25 point dollar neutral on Monday after coming in 1.5 point dollar neutral on Friday, a market source said.

After trading up to 102 on their market debut April 17, the notes were seen at 94.25 bid, 94.75 offered on Monday. “Yikes,” a market source said.

Clovis stock was $54.41 when the convertible notes priced. Clovis stock closed Monday at $48.36, a decrease of 3.61%.

NXP active

NXP Semiconductors’ 1% notes due 2019 continued to see trading on Monday. The notes traded just north of 118 with its stock down slightly early in Monday’s session.

NXP stock closed Monday at $103.17, a decrease of 1.88%.

NXP’s convertible notes and stock have slid since last week after Qualcomm initiated a round of layoffs to cut $1 billion in operational expenses.

Qualcomm’s bid to acquire NXP experienced another setback mid-April with regulators in China expressing concern about the deal.

Qualcomm increased its bid for NXP in late February to $127.50 a share from $110.00 a share, or $46 billion including debt, Bloomberg reported.

The increased offer was seen, in part, as an effort to fend off a hostile takeover from Broadcom Ltd.

President Donald Trump blocked Broadcom’s takeover attempt in mid-March, citing national security concerns.

Qualcomm’s long-delayed acquisition of NXP has received approval from eight of nine regulators with China the last approval needed.

China’s roadblock to the acquisition has been seen as the latest manifestation of increasing trade tensions between China and the United States, CNN reported.

Ctrip’s MOU

While trade tensions with China may have thrown a monkey-wrench into NXP’s acquisition, Shanghai-based Ctrip.com’s convertible notes continued to perform well.

The notes saw active trading after the company announced a partnership with Paris-based hotel group AccorHotels on Monday.

Ctrip.com’s 1.99% notes due 2025 were wrapped around 112.5 during Monday’s session. The notes have traded in a range of 112 to 114 for much of April, according to Trace data.

Ctrip.com’s 1% notes due 2020 were wrapped around 105 in active trading on Monday. Ctrip.com stock closed Monday at $42.92, an increase of 0.68%.

The memorandum of understanding between AccorHotels and Ctrip enables Ctrip to display AccorHotels global inventory of hotels to its online customers, giving AccorHotels access to China’s outbound travelers, TRweekly reported.

Insmed gains

Insmed’s 1.75% convertible notes due 2025 were up on an outright basis as the biotech company’s stock surged more than 10% on Monday.

The 1.75% convertible notes were up about 4 points outright to trade at 96.5 on Monday, according to Trace data.

Insmed stock closed Monday at $26.05, an increase of 10.76%. Credit Suisse upgraded Insmed to outperform from neutral and increased its price target for stock to $33.00 from $27.00.

Mentioned in this article:

Clovis Oncology Inc. Nasdaq: CLVS

Ctrip.com Intl. Ltd Nasdaq: CTRP

Insmed Inc. Nasdaq: INSM

NXP Semiconductors NV Nasdaq: NXPI

Voya Financial Inc. NYSE: VOYA

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