Tilray convertible notes volatile; Ctrip.com active; Illumina As contract, Bs expand

By Abigail W. Adams

Portland, Me., Oct. 5 – Friday opened with $450 million in new convertible notes from Tilray Inc. hitting the secondary space.

The new paper was in focus and dominated trading activity with more than $90 million on the tape by late afternoon.

While spiking early in the session, they dropped on an outright and dollar-neutral basis into the afternoon on a volatile day for the stock, sources said.

While trading paled in comparison, Ctrip.com International Ltd.’s 1.25% convertible notes due Oct. 15, 2018 were active in the secondary space with less than two weeks to go until their maturity.

Illumina Inc.’s convertible bonds were again volume movers with the A tranche contracting and the B tranche continuing to improve.

Tilray volatile

Tilray priced an upsized $450 million of five-year convertible notes after the market close on Thursday at the midpoint of talk with a coupon of 5% and an initial conversion premium of 15%.

Price talk had been for a coupon of 4.75% to 5.25% and an initial conversion premium of 12.5% to 17.5%.

The deal was upsized from $400 million. The greenshoe was also upsized to $67.5 million from $60 million.

“People liked the story,” a market source said. The deal was heard to be oversubscribed prior to the public launch.

The new paper traded up to 101 bid, 101.5 offered early in the session. However, the notes came in alongside stock into the afternoon.

They were seen trading at par versus a stock price of $146.00 shortly before 11 a.m. ET, sources said.

The notes were at 99.25 bid, 100.25 offered versus an equity price of $143.5 and later dropped to trade on a 98 handle with stock down more than 6%, sources said.

The notes continued to trade on a 98 handle with stock down 3% in the mid-afternoon.

Tilray stock continued to trade up toward market close.

Stock traded to a high of $153.60 and a low of $134.00 before closing the day at $146.91, an increase of 0.92%.

The notes were contracted dollar-neutral in the late afternoon, a market source said.

However, with no borrow on the stock, the trading activity was driven by outright accounts.

The drop in the notes was largely driven by supply and demand dynamics with flippers involved and holders who thought the notes would trade better punting, a source said.

Valuations of the deal from the British Columbia-based medical cannabis company varied widely based on the assumptions used.

The deal was marketed with a credit spread of 500 basis points over Libor and a 40% vol., which modeled about 5 points cheap.

However, other sources pegged the credit spread at 800 bps, with the notes modeling about 15 points rich.

Some sources felt the wider credit spread was needed due to the short time frame the company has been public and the small amount of revenue reported last quarter.

However, people were buying in based on the growth story with the company’s revenue and customer base on the rise, sources said.

While the notes had a lackluster performance on their secondary market debut, if the borrow on the stock improves the notes are expected to jump.

“If that changes, they’re going to go much higher,” a market source said. “They came on such cheap terms.”

Ctrip.com active

Ctrip.com’s 1% convertible notes due Oct. 15, 2018 saw another burst of trading activity as the notes enter their final days before maturity.

The 1% notes were trading between 99.93 and par with the yield to maturity between 1.242% to 6.256%, according to Trace data.

The notes have steadily traded down as they have approached their maturity date.

The notes are busted, have no conversion value and are trading for their yield, a market source said.

Illumina mixed

Illumina’s convertible notes remained active in the secondary space as stock again spiraled downward.

Illumina’s 0% convertible notes due 2019 dropped about 6 points outright to trade at 131. They were contracted about 0.25 point dollar-neutral, according to a market source.

While Illumina’s A tranche contracted, the biotech firm’s 0.5% convertible notes due 2021 were down about 5 points outright to close the day at 138.67.

The notes were seen slightly better dollar-neutral, a market source said.

Illumina’s most recently priced 0% convertible notes due 2023 were again slow to trade.

Illumina stock closed Friday at $329.52, a decrease of 4.41%.

Illumina’s A and B tranches were also active on Thursday with the 0% convertible notes due 2019 largely unchanged dollar-neutral as the 0.5% convertible notes due 2020 expanded about 0.375 point.

Illumina stock also dropped more than 4% on Thursday.

Mentioned in this article:

Ctrip.com International Ltd. Nasdaq: CTRP

Illumina Inc. Nasdaq: ILMN

Tilray Inc. Nasdaq: TLRY

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.