Morning Commentary: PG&E up on outright basis, flat dollar-neutral on debut; Xeris upsizes

By Abigail W. Adams

Portland, Me., June 26 – The convertibles primary market rounded out another high-volume week with another two deals pricing despite the general weakness in the market.

PG&E Corp. priced $1.45 billion three-year par of $100 equity units after the market close on Thursday. The units were in focus. While they traded up on an outright basis, they were flat on a dollar-neutral, or hedged, basis in early trading.

While some question whether the company would go through with the deal after its stock was decimated, Xeris Pharmaceuticals, Inc. upsized its offering of five-year convertible notes to $75 million.

PG&E flat

PG&E priced $1.45 billion three-year par of $100 equity units after the market close on Thursday at the rich end of talk with a coupon of 5.5% and a threshold appreciation premium of 22.5%.

Price talk was for a dividend of 5.5% to 6% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The units consist of a prepaid forward stock purchase contract and a zero-coupon U.S. treasury strip.

Concurrently with the equity units, the company priced a $4 billion, or 423,372,629 share, common stock offering at $9.50 per share.

The equity units were trading up on an outright basis.

They were changing hands around 102 early in the session.

However, the units were flat dollar-neutral based off of the concurrent offering, a market source said.

PG&E stock traded to a high of $10.06 early in Friday’s session.

However, stock came in as the session progressed and was trading at $9.43, a decrease of 3.08%, shortly before 11 a.m. ET.

Xeris upsizes

Xeris priced an upsized $75 million of five-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 5% and an initial conversion premium of 12.5%.

Price talk was for a coupon of 4.5% to 5% and an initial conversion premium of 12.5% to 17.5%, according to a market source.

The greenshoe was also upsized to $11.25 million.

The initial size of the offering was $60 million with a greenshoe of $9 million.

Concurrently, the company priced a secondary offering of $20 million, or 7.4 million shares, of common stock at $2.72.

Xeris stock was decimated on Thursday, closing the day down 48%, which led some to question whether the company would follow through with the offering.

“They obviously needed the cash,” a source said.

The notes were not active early in Friday’s session, a market source said.

Losses continued to mount for Xeris stock. Stock traded down to $2.53, a decrease of 6.99% shortly before 11 a.m. ET.

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