Sunnova on deck; Halozyme convertible offering oversubscribed; UpHealth exchanges

By Abigail W. Adams

Portland, Me., Aug. 15 – The convertibles primary market saw an active start to the week with two new offerings on deck.

Sunnova Energy International Inc. plans to price $425 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.375% to 2.75% and an initial conversion premium of 25% to 30%, according to a market source.

J.P. Morgan Securities LLC is bookrunner for the Rule 144A offering, which carries a greenshoe of $75 million.

In the latest refinancing deal, Halozyme Therapeutics Inc. plans to price $500 million of six-year convertible notes after the market close on Monday.

The deal looked cheap based on underwriters’ assumptions and played to heavy demand during bookbuilding.

Meanwhile, UpHealth Inc. placed $67.5 million of three-year variable-rate convertible secured notes on Monday with proceeds to be used to repurchase $45 million of its 6.25% convertible notes due 2026.

The buyback sparked a flurry of early session secondary market activity in the 6.25% notes.

While the primary market was active, the convertibles secondary space was subdued on Monday as equity indexes wobbled early in the session before extending their rally by the market close.

The Dow Jones industrial average closed Monday up 151 points, or 0.45%, the S&P 500 index closed up 0.40%, the Nasdaq Composite index closed up 0.62% and the Russell 2000 index closed up 0.23%.

There was $400 million on the tape about one hour before the session close with few notable price movements in the space.

Stem, Inc.’s 0.5% convertible notes due 2028 were on the rise in active trading with the notes hitting their highest outright level since January.

The company is poised to benefit from the passage of the Inflation Reduction Act.

Halozyme oversubscribed

Halozyme plans to price $500 million of six-year convertible notes after the market close on Monday with price talk for a coupon of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be marketed with assumptions of 300 basis points over Libor and a 38% vol.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of talk, a source said.

The deal played to heavy demand during bookbuilding with the offering quickly oversubscribed and books closing early, sources said.

The offering is the primary market’s latest refinancing deal, the dominant source of primary market activity in August.

In addition to repurchasing up to $200 million in common stock and repaying its outstanding $250 million term loan facility due 2026, Halozyme will exchange a portion of its outstanding 1.25% convertible notes due 2024 for cash and shares in privately negotiated transactions.

The 1.25% exchangeable notes changed hands at 180.5 early Monday, according to a market source.

UpHealth exchanges

UpHealth’s 6.25% convertible notes due 2026 were active in the secondary space after the global digital health company announced a refinancing transaction.

UpHealth privately placed $67.5 million of three-year variable-rate convertible secured notes on Monday with proceeds to be used to repurchase $45 million of its 6.25% convertible notes due 2026.

The new variable-rate convertible notes will accrue interest at a rate equal to SOFR plus 900 bps with the minimum interest rate 10.5% and the initial conversion premium 101%, according to a company news release.

“This was an interesting exchange,” a source said.

The 6.25% convertible notes were trading at par early in Monday’s session with the activity related to the buyback.

The market value of the remaining 6.25% notes will likely be below par with the variable-rate convertible notes, which are secured, priming them over, or pushing them further down the capital structure, a source said.

Stem gains

Stem’s 0.5% convertible notes due 2028 were on the rise in active trading with the company poised to benefit from passage of the Inflation Reduction Act.

The 0.5% notes gained about 2.5 points outright with stock up more than 6%.

They stood poised to close the day at 82.5, according to a market source.

Stem’s stock traded to a low of $15.63 and a high of $16.81 before closing the day at $16.56, an increase of 6.29%.

The artificial intelligence-driven energy software and services company is poised to benefit from the passage of the Inflation Reduction Act, which contains $370 billion in investments targeting climate change.

The legislation was applauded by Stem CEO John Carrington, who called the legislation “transformational for our country, the energy industry, and our company,” in a press release.

Mentioned in this article:

Halozyme Therapeutics Inc. Nasdaq: HALO

Stem, Inc. NYSE: STEM

Sunnova Energy International Inc. NYSE: NOVA

UpHealth Inc. NYSE: UPH

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