Summit Hotel convertibles on deck; NeoGenomics eyed; NextEra soars; Tilray in focus

By Abigail W. Adams

Portland, Me., Jan. 6 – The convertibles primary market returned to action the first week of the New Year with two offerings on deck.

Summit Hotel Properties Inc. plans to price $200 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

BofA Securities Inc. and Deutsche Bank Securities Inc. are joint bookrunners for the registered offering, which carries a greenshoe of $30 million.

NeoGenomics Inc. plans to price $250 million of seven-year convertible notes after the market close on Wednesday.

Sources had mixed opinions about the offering, which looked to be about fair value at the midpoint of talk.

Meanwhile, equities were mixed on Wednesday with the tech-heavy Nasdaq closing in the red and the Dow Jones industrial average closing at a new high as Democrats took both seats in Georgia’s runoff election for the Senate.

While violence erupted in the Capitol late in the trading session as protesters stormed Congress, the convertibles market remained firm.

There was $86 million in reported volume about one hour into the session and $700 million on the tape about one hour before the market close, a source said.

NextEra Energy Partners LP’s 0% convertible notes due 2025 soared in heavy volume as investors piled into the renewable energy sector as a result of the Democrats’ victory in Georgia.

Tilray Inc.’s 5% convertible notes due 2023 were also active as cannabis stocks surged with the “blue wave” viewed as a positive for the industry.

NeoGenomics in focus

NeoGenomics plans to price $250 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 30% to 35%, according to a market source.

Using assumptions of 450 basis points over Libor and a 40% vol., the deal looked 0.35 point cheap at the midpoint of talk, a source said.

Another source felt the company deserved a tighter credit spread.

Using a credit spread of 400 bps, the deal looked 0.22 point cheap.

The company makes money and is cash flow positive. “The trend is your friend, and it’s an upward trending stock,” the source said.

While some sources thought the deal looked good, others were not enamored with the offering.

The seven-year structure was a drawback, a source said.

NeoGenomics is a repeat issuer of convertible notes, and some buyers preferred the cancer genetics testing company’s deep-in-the-money 1.25% convertible notes due 2025 to the current offering, a source said.

NextEra surges

NextEra’s once struggling 0% convertible notes due 2025 soared in heavy volume on Wednesday as investors piled into the renewable energy sector.

The 0% convertible notes gained 8 points outright.

They traded up to 109 in the late afternoon, a source said.

NextEra’s stock traded to a high of $79.47 and a low of $71.05 before closing the day at $78.74, an increase of 11.99%.

The notes topped par for the first time since pricing on Dec. 1 during Tuesday’s session.

With a 50-50 split in the Senate, there is a greater likelihood of the Biden administration pushing through a green agenda.

Tilray active

Tilray’s 5% convertible notes due 2023 were active as cannabis sector stocks also skyrocketed following the election results in Georgia.

The 5% notes were changing hands at 86.75 early in the session with a yield of 10.72%.

They traded up to 87 in the late afternoon.

Tilray’s stock traded to a high of $12.04 and a low of $10.52 before closing the day at $10.77, an increase of 13.25%.

While Tilray’s stock soared on Wednesday, the notes were largely trading for their yield with their duration short, a source said.

Mentioned in this article:

NeoGenomics Inc. Nasdaq: NEO

NextEra Energy Partners LP NYSE: NEP

Summit Hotel Properties Inc. NYSE: INN

Tilray Inc. Nasdaq: TLRY

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