Convertibles market sees one deal for week from Tilray in debt-juggling transaction

Chicago, May 26 – The convertible bond primary space would have been empty in the May 22 week had not cannabis company Tilray Brands, Inc. shown up at the 11th hour to price a $150 million offering.

The Thursday-breaking transaction from the Leamington, Ont.-based issuer picked up a Canadian bookrunner during pricing for what ended up being a three-bookrunner sale with BofA Securities Inc., Jefferies LLC and TD Securities (USA) LLC listed in the final term sheet.

Jefferies, or an affiliate rather, is handling the complicated stock lending arrangements to help investors hedge their new bonds.

The initial conversion premium was set at the remarkably low level of 12.5% before pricing on Thursday.

The coupon priced at a robust 5.2%, at the upper end of the 5% to 5.25% coupon talk.

The registered notes priced against a stock price of $2.66 before that stock price did a freefall on Friday to end the day around 23% lower than where it started the week, and on a day when the Nasdaq Composite index was trending around 2.25% better.

The company reported in its most recent earnings report $408.2 million in cash and marketable securities.

Tilray exchange

The partial related buyback announced on Thursday to Tilray’s existing 5% convertible senior notes, at par, represents a premium to recent trading prices.

The bonds have not broken above par in over a year but have been running in a flatline roughly around 97, with 2 or 3 points up or down, for the past two years.

A little less than 10% of the issue is being repurchased; however, it got traders’ attention just enough to put a trade or two on the board above par on Friday.

Hexo

Tilray has a looming expected closing date of an all-stock $56 million acquisition of Hexo Corp. in June.

Hexo’s stock dropped around 12% on Friday.

The all-share consideration values Hexo at $1.25 per share. Hexo’s shares were running at just over $1.00 per share late Friday afternoon.

Hexo has going-concern issues, and the merger is considered very much in shareholders of Hexo’s interest.

The vote on the acquisition on Hexo’s part is expected to be held on June 12.

Lumentum

As an aside, Lumentum Holdings Inc.’s 0.5% convertible bonds due 2028 were on the board on both Thursday and Friday with some midafternoon trades around 2 points higher than what has been relatively flat mid-74 trading levels on the bonds.

The company’s stock had a turnaround on Friday, shifting up 12%, as of late afternoon trading to a share price of around $53.75.

Mentioned in this article:

Tilray Brands, Inc. Nasdaq: TLRY

Lumentum Holdings Inc. Nasdaq: LITE

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