Retrophin expands; Perficient below par; Infinera looks cheap; Guidewire, Verint active

By Abigail W. Adams

Portland, Me., Sept. 6 – New convertibles were in focus on Thursday with $365 million in new paper hitting the secondary space and an additional $275 million set to price after the market close.

Infinera Corp. plans to price $275 million of six-year convertible notes after the market close on Thursday.

The deal was said to be in high demand during bookbuilding and will most likely be upsized. Sources pegged the deal several points cheap.

Retrophin, Inc. priced an upsized $240 million of seven-year convertible notes and Perficient Inc. priced $125 million of five-year convertible notes after the market close on Wednesday. The new paper dominated trading activity in the secondary space.

While Retrophin made large gains on both an outright and dollar-neutral basis, Perficient dropped below par and was largely flat dollar-neutral, sources said.

While the new paper was the name of the game on Thursday, Verint Systems Inc.’s 1.5% convertible notes due 2021 and Guidewire Software Inc.’s 1.25% convertible notes due 2025 were active after both companies reported earnings beats.

Infinera looks cheap

Infinera plans to price $275 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 1.875% to 2.375% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal was marketed with assumptions that were either a credit spread of 450 basis points over Libor and a 40% vol. or 475 bps over Libor and a 38% vol., sources said.

There was a wide variation in valuations based on the assumptions used. One source pegged the deal 5.4 points cheap, another 7 points cheap, another 4.18 points cheap and another 3.5 points cheap.

However, all sources were in agreement the deal looked cheap.

“I suspect it will do pretty well,” a market source said.

The deal was heard to be in demand during bookbuilding. It will most likely be upsized and price at the midpoint of talk, a market source said.

Retrophin expands

Retrophin priced an upsized $240 million of seven-year convertible notes after the market close on Wednesday with a coupon of 2.5% and an initial conversion premium of 35%.

The deal came at the midpoint of talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 32.5% to 37.5%.

The initial size of the deal was $200 million. The greenshoe was also upsized to $36 million from $30 million.

The new notes traded up right out of the gate. They were seen at 102 bid pre-open and continued to rise in active trading, a market source said.

The notes traded as high as 105 on an outright basis with most prints between 103 and 104 early in the session as stock shot up more than 5%. They were seen at 102.75 bid, 103.5 offered as stock came in during the afternoon.

The notes were expanded 2.5 to 3 points dollar-neutral, a market source said.

Stock closed the day at $28.98, an increase of 0.84%.

Retrophin’s stock dropped more than 10% during the bookbuilding process. The success of the convertible notes in the secondary market was no surprise given how cheap they modeled, a market source said.

The deal was pegged between 1 and 3 points cheap at the midpoint of talk.

While Retrophin’s new 2.5% notes were in focus, the company’s 4.5% convertible notes due 2019 also saw some action during Thursday’s session.

The notes were seen changing hands at 171.75. Parity for the notes is 169.5, a market source said.

Proceeds from the new offering will be used to repurchase a portion of the biopharmaceutical company’s 4.5% convertible notes due 2019, which have $46 million outstanding.

Perficient below par

Perficient priced $125 million of five-year convertible notes after the market close on Wednesday at the cheap end of talk with a coupon of 2.375% and an initial conversion premium of 25%.

Price talk had been for a coupon of 1.875% to 2.375% and an initial conversion premium of 25% to 30%, according to a market source.

The bonds struggled out of the gate. They were seen trading between 98.75 and par early in the session.

They were down to 97.5 bid, 98 offered later in the afternoon with stock off more than 5%. “They’re not faring too well,” a market source.

While down outright, the notes were largely flat on a dollar-neutral basis. They were moving on a 60% delta, a market source said.

Perficient stock closed Thursday at $28.62, a decrease of 4.85%.

Sources pegged the deal at about fair value at the midpoint of talk.

Earnings beat

Verint Systems’ 1.5% convertible notes due 2021 were active and making gains on an outright basis alongside stock after a second-quarter earnings beat.

The 1.5% notes climbed about 4 points outright as stock surged as much as 10% in intraday trading.

The notes were changing hands at 103 early in the session and traded around 104.9 in the afternoon, sources said.

Verint stock closed Thursday at $51.70, an increase of 9.53%.

Verint reported non-GAAP earnings per share of 76 cents, which beat analyst expectations for earnings per share of 61 cents.

Guidewire’s 1.25% convertible notes due 2025 were also active in the secondary space after a third-quarter earnings beat although with little change on an outright basis.

The 1.25% convertible notes traded up 1 point to 107.75, according to Trace data. Guidewire stock closed Thursday at $98.91, an increase of 2.04%.

Guidewire reported non-GAAP earnings per share of 5 cents for the third-quarter versus analyst expectations of earnings per share of 1 cent.

Mentioned in this article:

Guidewire Software Inc. NYSE: GWRE

Infinera Corp. Nasdaq: INFN

Perficient Inc. Nasdaq: PRFT

Retrophin, Inc. Nasdaq: RTRX

Verint Systems Inc. Nasdaq: VRNT

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