NextEra on tap; Sarepta convertibles in focus, expand on debut; Alnylam, iQIYI active

By Abigail W. Adams

Portland, Me., Sept. 14 – The convertibles primary market stood poised for its heaviest volume week of the year with one $2 billion offering on deck and another $1 billion offering making its secondary market debut.

In an overnight deal, NextEra Energy Inc. plans to price $2 billion of three-year $50-par equity units after the market close on Wednesday with price talk for a fixed coupon of 6.926%, a fixed conversion premium of 25% and a reoffer price of 97.5 to 98.5, according to a market source.

Citigroup Global Markets Inc., Goldman Sachs & Co. LLC and Mizuho Securities USA Inc. are bookrunners for the registered offering.

Sarepta Therapeutics Inc. priced $1 billion of five-year convertible notes after the market close on Tuesday.

The new paper hit the secondary space on a volatile day for equities as the market struggled to find direction following Tuesday’s sell-off.

While the notes wavered on an outright basis early in the session alongside broader markets, they “caught a bid in a big way” and closed the day with strong outright and dollar-neutral gains.

Indexes wavered between gains and losses throughout Wednesday’s session before a bout of late-session buying pushed them into positive territory at the close.

The Dow Jones industrial average closed Wednesday up 30 points, or 0.10%, the S&P 500 index closed up 0.34%, the Nasdaq Composite index closed up 0.74% and the Russell 2000 index closed up 0.24%.

There was $185 million in reported convertibles trading volume about one hour into the session and $600 on the tape about one hour before the market close with Sarepta’s new notes accounting for nearly half of the total volume.

While the secondary space remained weak, the selling activity that did take place was orderly with no panic setting in and no names seeing outsized contractions, a source said.

Few names outside of Sarepta saw concentrated trading activity.

Alnylam Pharmaceuticals Inc.’s new 1% convertible notes due 2027 remained active their second day in the secondary space although with little movement in price.

iQIYI, Inc.’s 2% convertible notes due 2025 were also active although the notes remained flat as they switched hands.

Sarepta catches a bid

Sarepta 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 1.25% notes were volatile early in the session alongside broader markets.

While the 1.25% notes were trading around 101 out of the gate, they dropped below par as selling pressure dragged down markets mid-morning.

However, Sarepta’s convertible notes and stock “caught a bid in a big way,” with the notes closing Wednesday with strong outright and dollar-neutral gains, a source said.

The convertible notes were changing hands at 103 versus a stock price of $106.83 in the late afternoon.

They expanded about 1.5 points dollar-neutral, a source said.

There was $225 million in reported volume.

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 traded to a low of $103.05 and a high of $107.67 before closing the day at $107.57, an increase of 2.29%.

Alnylam flat

Alnylam’s 1% convertible notes due 2027 remained active their second day in the secondary space although with little movement in price.

The 1% notes remained wrapped around par in active trading.

They were changing hands at par versus a stock price of $207.71 in the late afternoon.

There was $23 million in reported volume.

Alnylam’s stock traded to a low of $203.01 and a high of $209.15 before closing the day at $208.28, an increase of 0.82%.

The notes made their secondary market debut on Tuesday as equity indexes collapsed after the release of August’s Consumer Price Index report.

However, the notes held par and expanded 1 point dollar-neutral despite the heaviness in the market.

iQIYI active

iQIYI’s 2% convertible notes due 2025 were active on Wednesday as a large amount of notes switched hands.

However, the notes were unchanged in the activity.

The 2% notes traded at 90.25 in the late afternoon with a yield of 22%, according to a market source.

There was $11 million in reported volume.

While not equity sensitive, iQIYI’s American Depositary Shares closed Wednesday at $3.47, an increase of 3.58%.

iQIYI’s convertible notes have traded on a 90-handle since early September after the struggling notes were boosted by a $500 million private placement of convertible notes.

The private placement increased investor confidence in the Beijing-based streaming service’s ability to cover the notes, which become putable on April 1, 2023.

Mentioned in this article:

Alnylam Pharmaceuticals Inc. Nasdaq: ALNY

iQIYI, Inc. Nasdaq: IQ

NextEra Energy Inc. NYSE: NEE

Sarepta Therapeutics Inc. Nasdaq: SRPT

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