Avantor upsizes convertible preferreds offering; Illumina, Finisar lead volume; FireEye active

By Abigail W. Adams

Portland, Me., May 16 – The convertibles secondary space remained subdued on Thursday with little to report as market players waited for market volatility to subside and some new deals to come down the pike.

If equities hold, the primary market is expected to return to action in the coming week, sources said.

Despite the slow pace of the primary market over the past week, the convertibles space will see new paper before the week comes to a close.

Avantor Inc. planned to price an offering of three-year series A mandatory convertible preferreds after the market close Thursday.

The deal was heard to be in demand during bookbuilding and was upsized to $750 million from $500 million.

Meanwhile, volume remained light in the secondary space with few names seeing concentrated trading activity.

Illumina Inc.’s convertible notes were again major volume movers in the secondary space.

Finisar Corp.’s 0.5% convertible notes due 2036 were also in focus as II-VI Inc.’s buyout of the company nears completion.

FireEye Inc.’s 1.625% convertible notes due 2035 were also active although largely unchanged in secondary trading.

Avantor upsizes

Avantor upsized its offering of three-year series A mandatory convertible preferreds to $750 million from $500 million with the deal slated to price after the market close Thursday, according to a market source.

Talk remained the same with the deal planning to price with a dividend of 5.75% to 6.25% and a threshold appreciation premium of 17.5% to 22.5%.

The deal has been marketed for well over two weeks and is pricing alongside the initial public offering of the Radnor, Pa.-based manufacturer and marketer of materials for the life sciences, pharmaceutical, biomaterial and research/diagnostic markets.

“It truly is a new issue,” a market source said.

Some sources pointed to the concurrent pricing of the convertible preferreds with the IPO as a drawback that will make the deal difficult to hedge.

However, the deal was doing well during bookbuilding with the company well-liked by investors, a source said.

The company has a diversified product line that supports a breadth of industries from semiconductors to biotech.

With clients that range from universities to government agencies, the company also has a broad customer base.

The new paper will also be welcome given the dearth of new deals recently and the amount of mandatory preferreds leaving the space, sources said.

The challenge for the company will be whether it can deleverage itself to a more sustainable level, a source said.

Illumina in focus

Illumina’s convertible notes again saw high-volume trading activity on Thursday on an otherwise quiet day in the convertible space.

While active, the notes were little changed, sources said.

Illumina’s 0.5% convertible notes due 2021 were trading on a 136 handle, a market source said.

The 0% convertible notes due 2023 traded into a 107.583 bid in the mid-afternoon.

The notes saw $13 million and $5 million in reported volume, respectively.

“The fact that these are among the two most active tells you something,” a market source said.

Illumina stock closed Thursday at $309.85, an increase of 1.07%.

The notes were also active during Wednesday session.

Finisar’s buyout

Finisar’s 0.5% convertible notes due 2036 were also active during Thursday’s session.

The notes were changing hands around 97 with more than $10 million of the bonds on the tape.

Finisar stock closed Thursday at $22.03, a decrease of 3.84%.

The notes were active as II-VI zeroes in on its buyout of the company, which would trigger their change-of-control covenant.

II-VI announced in November that it would acquire Finisar in a $3.2 billion cash-and-stock deal.

The merger was approved by both companies’ shareholders in March with the deal expected to be completed in the next few months.

Finisar called its remaining 0.5% convertible notes due 2033 in April after a majority of holders exercised their put option in December.

FireEye flat

FireEye’s 1.625% convertible notes due 2035 were active although largely unchanged in secondary trading on Thursday.

The notes were changing hands around 94 with about $5 million on the tape early in the session. Trading activity petered off into the afternoon.

The notes largely trade for their yield, a market source said. They are putable on June 1, 2022.

FireEye stock closed Thursday at $15.45, a decrease of 0.32%.

Mentioned in this article:

FireEye Inc. Nasdaq: FEYE

Finisar Corp. Nasdaq: FNSR

Illumina Inc. Nasdaq: ILMN

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