Morning Commentary: Primary prices $1.06 billion; Vishay, Mindbody, Exact Sciences hit the market

By Abigail W. Adams

Portland, Me., June 8 – After a sluggish start to the week, the convertibles space is ending with a roar with $1.06 billion in new paper hitting the market on Friday.

Vishay Intertechnology Inc. priced an upsized offering of $600 million of seven-year convertible notes after the market close on Thursday with a coupon of 2.25% and an initial conversion premium of 27.5%.

Pricing came richer than price talk for a coupon of 2.5% to 3% and at the rich end of talk for an initial conversion premium of 22.5% to 27.5%, according to a market source.

The new paper was up about 1 point dollar neutral early in Friday’s session, a market source said.

Mindbody Inc. sold an upsized $270 million of five-year convertible notes prior to the market open on Friday at the midpoint of talk with a coupon of 0.375% and an initial conversion premium of 30%.

Price talk had been for a coupon of 0.125% to 0.625% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The notes were seen trading between par and 101 and were largely flat dollar neutral early in the session, a market source said.

Exact Sciences Corp. priced an upsized $190 million add-on to its 1% convertible notes due 2025 prior to the market open on Friday at a reoffer price of 106.5 plus accrued interest from Jan. 17.

There was no price talk for the overnight deal, which was heard to be as much as 3x oversubscribed, a market source said.

Vishay’s deal

Vishay’s new 2.25% convertible notes were expanding on their market debut as its stock came in from a more than 13% gain on Thursday.

While the deal priced with a coupon that was richer than price talk, it modeled cheap, sources said. The offering was upsized to $600 million from $525 million. However, the greenshoe of $75 million was eliminated.

The 2.25% notes were seen trading between 100.25 to 100.5 out of the gate but dropped below par to 99.8 as the stock got hit. While the notes dropped below par, they were expanding dollar neutral and were seen up about 1 point, a market source said.

The new 2.25% notes appeared to move on a 72% delta. As the bonds traded down outright, the premium widened, a source said. “It’s doing what it’s supposed to do,” the source said.

Proceeds from the $600 million offering will be used to repurchase $220 million principal amount of its 2.25% convertible notes due 2040 and $69 million principal amount of its 2.25% convertible notes due 2042 through individually negotiated agreements with a limited number of holders, according to a company news release.

Vishay stock spiked on Thursday with more than 20x the average trading volume as book building for the new 2.25% notes was in the works.

With the old bonds heavily hedged, the spike in stock price and trading volume was the result of a stock buyback as holders move out of the old notes, a source said.

Mindbody holds

Mindbody’s new 0.375% convertible notes due 2023 were seen trading between par and 101 on their market debut on Friday.

The deal was upsized to $270 million from $200 million. “It did well,” a market source said.

While the notes were up on an outright basis, they were flat dollar neutral, a market source said. “It’s basically trading around a 30% premium,” the source said. “That’s where it came and that’s where it’s holding.”

The notes move on about a 70% delta, a market source said.

Exact Sciences adds-on

In an overnight deal, Exact Sciences priced an upsized $190 million add-on to its 1% convertible notes due 2025 at a reoffer price of 106.5 plus accrued interest from Jan. 17.

The add-on priced about 1.25 points down dollar neutral from the previous levels of the 1% convertible notes, a market source said.

The 1% notes were seen trading between 106.5 and 106.75 early in Friday’s session. In the run up to the add-on, the convertible notes were trading with outright prices between 110 and 112, according to Trace data.

Exact Sciences priced an upsized $600 million of the 1% notes with an issue price of 98.75 mid-January, with the $90 million greenshoe later exercised in full.

The notes from the Madison, Wis.-based molecular diagnostics company, which is focused on the early detection of colorectal cancer, experienced a sell-off shortly after pricing.

They traded as low as 88 in early April but rebounded after a positive first-quarter earnings report later in the month.

The notes were trading in the 98 to 99 range for much of May but jumped on an outright basis after the American Cancer Society lowered its recommended screening age for colorectal cancer to 45 from 50.

The 1% notes have steadily climbed throughout June.

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