Convertibles issuance tops $3 billion for week, Clovis, BlackLine expand; Ironwood drops

By Abigail W. Adams

Portland, Me., Aug. 9 – The convertibles primary market rounded out the highest volume week for new deal activity year to date with two new deals pricing.

BlackLine Inc. priced $435 million of five-year convertible notes and Clovis Oncology, Inc. sold an upsized $250 million of five-year convertible notes after the market close on Thursday.

Both deals were expanding on their market debut.

However, Ironwood Pharmaceuticals, Inc.’s recently priced five-year and seven-year convertible notes continued to lose steam in secondary trading with both tranches dropping below par.

Snap Inc.’s 0.75% convertible notes due 2026 remained active with the notes continuing to improve on an outright and a dollar-neutral basis.

Over the past week, six issuers have priced a combined $3.09 billion in eight tranches, marking the highest volume week for new deal activity in 2019.

While volatility whipsawed capital markets amid escalating trade tensions, the convertibles market was the place to be, sources said.

The convertibles market offers investors a strong hedge against the bond market and also enables them to stay invested in stocks with some protection against the market turmoil, a source said.

Blackline comes rich

BlackLine priced $435 million of five-year convertible notes at par with a coupon of 0.125% and an initial conversion premium of 37.5%.

Pricing came toward the rich end of talk for a coupon of 0% to 0.5% and at the rich end of talk for an initial conversion premium of 32.5% to 37.5%, according to a market source.

The 0.125% convertible notes were performing well in the secondary space on both an outright and dollar-neutral basis.

The 0.125% notes traded up to 101 with stock down early in the session. While they traded as high as 102, the notes came in to 100.25 bid, 100.75 offered by the mid-afternoon.

However, the notes were up about 1.25 points on a dollar-neutral, or hedged, basis, a source said.

BlackLine stock traded as high as $53.00 and as low as $51.22 before closing the day at $51.95, a decrease of 2.68%.

Clovis prices cheap

Clovis Oncology priced an upsized $250 million of five-year convertible notes after the market close on Thursday with a coupon of 4.5% and an initial conversion premium of 25%.

Pricing came at the cheap end of talk for a coupon of 4% to 4.5% and an initial conversion premium of 25% to 30%, according to a market source.

The greenshoe was also upsized to $37.5 million. The initial size of the deal was $225 million with a greenshoe of $33.75 million.

Clovis Oncology’s new 4.5% notes were wrapped around par in active trading, a market source said.

With stock down during Friday’s session, the notes were expanded up to 2 points dollar-neutral, a source said.

Clovis stock traded as low as $5.20 before closing the day at $5.68, a decrease of 2.57%.

The deal was heard to be the result of reverse inquiry with proceeds to be used to repurchase $190.3 million of Clovis’ 2.5% convertible notes due 2021 in privately negotiated transactions.

There was a limited audience for Clovis’ new offering, which was primarily marketed to holders of the biopharmaceutical company’s existing notes.

Ironwood below par

While Ironwood’s two-tranche convertible notes offering started off strong on their market debut on Thursday, they continued to lose steam on Friday with both tranches dropping below par.

Ironwood’s 0.75% convertible notes due 2024 dropped as low as 98.625 on Friday. Trading volume was light with lots of bids wanted but few received, sources said.

Ironwood’s 1.25% convertible notes due 2026 were more active with the notes changing hands around 99.625.

Ironwood stock closed Friday at $9.47, a decrease of 1.15%.

While both notes modeled cheap based on underwriters’ assumptions, “no one believed the credit spreads,” a market source said.

The five-year tranche was marketed with assumptions of 375 basis points over Libor and a 40% vol. and the seven-year tranche was marketed with assumptions of 425 bps over Libor and a 40% vol.

Some sources felt the credit spread should have been wider.

Snap gains continue

Snap’s 0.75% convertible notes due 2026 continued to gain in active trading on Friday.

The notes traded as high as 106.75 during Friday’s session. They were expanded another 0.25 point dollar-neutral, according to a market source.

Snap stock traded as low as $16.63 and as high as $17.19 before closing the day at $16.98, an increase of 1.31%.

The notes have skyrocketed since hitting the secondary space on Wednesday.

The notes traded as high as 103 and were expanded about 4 points dollar-neutral on their market debut.

Mentioned in this article:

BlackLine Inc. Nasdaq: BL

Clovis Oncology, Inc. Nasdaq: CLVS

Ironwood Pharmaceuticals, Inc. Nasdaq: IRWD

Snap Inc. NYSE: SNAP

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