Morning Commentary: Cytokinetics convertibles hit the aftermarket, skyrocket on debut

By Abigail W. Adams

Portland, Me., July 1 – It was a quiet start to the new quarter in the convertibles secondary space with the exception of one name – Cytokinetics Inc.

Cytokinetics priced $450 million of five-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 3.5% and an initial conversion premium of 30%.

Price talk was for a coupon of 3% to 3.5% and an initial conversion premium of 30% to 35%, according to a market source.

The deal played to solid demand and the offering could have been upsized, a source said.

However, the deal was a refinancing of the biotech company’s deep-in-the-money 4% convertible notes due 2026 that have been trading at quadruple par.

The company repurchased $116.9 million of its outstanding 4% convertible notes due 2026 for $140.3 million in cash and 8,071,342 shares in privately negotiated transactions.

With the company essentially rolling over its outstanding convertible notes, stock was expected to remain relatively stable.

Word that the deal might upsize sent Cytokinetics’ stock tumbling in late trading on Thursday and the company opted to keep the deal at its initial size.

The new paper skyrocketed on its aftermarket debut.

It was marked at 106 bid, 107 offered on an outright basis early in the session, although the notes traded down with stock as the session progressed.

They expanded 3 points dollar-neutral, a source said.

Cytokinetics’ stock was changing hands at $39.80, an increase of 1.74%, shortly before 11 a.m. ET.

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