Morning Commentary: Sarepta convertible notes in focus early, expand on trading debut

By Abigail W. Adams

Portland, Me., Sept. 14 – It was an active morning in the convertibles secondary space as almost $1 billion of new supply hit the market.

Sarepta Therapeutics Inc. priced $1 billion of five-year convertible notes after the market close on Tuesday at par with a coupon of 1.25% and an initial conversion premium of 35%.

Pricing came at the rich end of talk for a coupon of 1.25% to 1.75% and at the midpoint of talk for an initial conversion premium of 32.5% to 37.5%.

Approximately $20 million of the aggregate amount was placed with an entity affiliated with the board of directors in a concurrent private placement.

The new paper dominated activity in the secondary space and was putting in a strong performance as equities struggled to find direction.

Equity indexes were mixed after wavering between gains and losses early in the session following Tuesday’s sell-off.

The Dow Jones industrial average was up 60 points, or 0.22%, the S&P 500 index was up 0.36%, the Nasdaq Composite index was up 0.51% and the Russell 2000 index was down 0.08% shortly before 11 a.m. ET.

There was $185 million in reported convertibles trading volume about one hour into the session with Sarepta’s convertible notes accounting for $141 million of the volume on the tape.

The new 1.25% notes were holding around 101 on an outright basis with stock off early in the session.

They expanded about 1.375 points dollar-neutral, a source said.

Approximately $248.3 million of proceeds from the new offering were used to repurchase for cash $150.6 million in principal of the company’s 1.5% convertible notes due 2024.

There were several pre-market prints of the 1.5% notes at 164.5, which appeared to be their buyback price.

Sarepta’s stock was changing hands at $104.20, a decrease of 0.92%, shortly before 11 a.m. ET.

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