Sarepta convertibles eyed; Alnylam flat outright, expands on swap; Wayfair falls

By Abigail W. Adams

Portland, Me., Sept. 13 – The convertibles primary market stood poised for one of its highest volume weeks of the year with one $1 billion offering set to price after the market close on Tuesday and another $900 million offering making its aftermarket debut.

The new paper comes as equity markets collapsed following August’s Consumer Price Index report.

While an ugly day for equity markets, Sarepta Therapeutics Inc.’s $1 billion offering of five-year convertible notes played to solid demand with books closing early.

Meanwhile, Alnylam Pharmaceuticals Inc.’s new 1% convertible notes due 2027 made their aftermarket debut as equity markets plummeted.

The Dow Jones industrial average closed Tuesday down 1,276 points, or 3.94%, the S&P 500 index closed down 4.32%, the Nasdaq Composite index closed down 5.16% and the Russell 2000 index closed down 3.91%.

While the CPI print eroded Alnylam’s premarket gains on an outright basis, the notes held at par and expanded dollar-neutral in heavy volume.

Trading volume was relatively light outside of the new paper as the secondary space took a hit amid the downturn in equities.

The secondary space, in general, was off about 0.5 point dollar-neutral, a source said.

Wayfair Inc.’s 3.25% convertible notes due 2027 fell outright as stock got clobbered during Tuesday’s session.

However, the notes were moving in line dollar-neutral.

While the broader market was under pressure, VNET Group, Inc.’s 0% convertible notes due 2026 made large gains after the company announced it was reviewing a take-private offer made by the company’s founder.

Sarepta eyed

Sarepta plans to price $1 billion of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 32.5% to 37.5%.

The refinancing deal from the biotech launched post-close on Monday following strong demand for new paper from sector peer Alnylam.

The deal was heard to be in the market with assumptions of a 400 basis points spread and a 42% vol., a source said.

The deal looked cheap based on underwriters’ assumptions and was from a well-known and well-liked name in the convertibles universe, a source said.

While there was some “grumbling” in the market following the rich pricing of Alnylam and the CPI print, the deal played to solid demand with books closing early, a source said.

A portion of proceeds from the offering will be used to repurchase for cash a portion of the company’s 1.5% convertible notes due 2024 in privately negotiated transactions.

Sarepta’s outstanding convertible notes have a “strong” holders list with the refinancing helping drive demand for the new issue, a source said.

The 1.5% notes trade rich in the secondary with the notes changing hands at 165 on Tuesday.

While some sources felt the new offering was also rich, it offered an opportunity to play Sarepta through a more balanced convertible note.

Alnylam’s debut

Alnylam Pharmaceuticals priced $900 million of five-year convertible notes after the market close on Monday at par with a coupon of 1% and an initial conversion premium of 35%.

Pricing came tighter than talk for a coupon of 1.25% to 1.75% and at the rich end of talk for an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be as much as 4x oversubscribed.

While the new paper hit the secondary space on an ugly day for equities, “it’s held in quite nicely,” a source said.

The new paper traded as high as 101.5 on an outright basis pre-open.

Then the CPI report came out.

The downturn in equities eroded the new paper’s pre-market gains.

However, the 1% notes held at par in heavy volume and expanded 1 point dollar-neutral, sources said.

Alnylam’s stock traded to a high of $209.38 and a low of $205.02 before closing the day at $206.59, a decrease of 2.55%.

Wayfair down

Wayfair’s new 3.25% convertible notes due 2027 fell on an outright basis with stock clobbered during Tuesday’s session.

The 3.25% convertible notes sank 7 points outright with stock off 11%.

The convertibles were trading on a 103.5 heading into the market close. However, the notes were moving in line dollar-neutral, sources said.

Wayfair’s stock traded to a low of $49 and a high of $52.67 before closing the day at $49.76, a decrease of 11.05%.

VNET gains

VNET’s 0% convertible notes due 2026 were an outlier on a brutal day for the market with the notes posting large gains after the company announced it was reviewing a non-binding proposal to take the company private.

The 0% convertible notes rose 5 points outright with equity up more than 20%.

They were changing hands at 87 in the late afternoon, sources said.

The Beijing-based internet data center services provider’s American Depositary Shares traded to a high of $6.29 and a low of $5.23 before closing the day at $5.66, an increase of 20.68%.

The company’s equity spiked after it announced that it was forming a special committee to review a non-binding proposal from the company’s founder to purchase all outstanding shares for $8.20 per ADS.

The acquisition bid marks the second for the company.

VNET’s 0% convertible notes spiked 8 points to an 88-handle in April after news broke that the company had received an unsolicited takeover bid from China investment firms Hina Group and Industrial Bank Co. for $8 per ADS.

While the company’s convertible notes and equity shot up to similar levels in April, they fell back to the low 80s with no follow-up news on the proposal.

Mentioned in this article:

Alnylam Pharmaceuticals Inc. Nasdaq: ALNY

Sarepta Therapeutics Inc. Nasdaq: SRPT

VNET Group, Inc. Nasdaq: VNET

Wayfair Inc. NYSE: W

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