Morning Commentary: Ares Capital, Exact Sciences price convertible notes at discounts

By Abigail W. Adams

Portland, Me., March 6 – Wednesday opened with $1 billion in new convertible paper hitting the secondary space.

Exact Sciences Corp. priced an upsized $650 million of eight-year convertible notes and Ares Capital Corp. priced $350 million of five-year convertible notes after the market close on Tuesday.

Both deals priced at a discount.

Ares Capital dominates

Ares Capital priced $350 million 4.625% five-year convertible notes after the market close on Tuesday at 98 with an initial conversion premium of 15%.

The notes priced with a yield of 5.085%. The discount pushed the initial conversion premium of 12.7%, a market source said.

Pricing came at the cheap end of revised price talk for a reoffer price of 98 to 98.5, a coupon of 4.625% and an initial conversion premium of 15%.

Initial price talk had the deal coming at par with a coupon of 4.125% to 4.625% and an initial conversion premium of 15% to 20%.

The new paper dominated activity in the secondary space. However, it was trading sloppy, a market source said.

The 4.625% notes were trading between 97.625 and 98 out of the gate, sources said.

More than $72 million of the bonds were on the tape a little over one hour into Wednesday’s session.

Exact Sciences active

Exact Sciences priced an upsized $650 million of 0.375% eight-year convertible senior notes at 99.5 after the market close on Tuesday with an initial conversion premium of 27.5%, according to an FWP filing with the Securities and Exchange Commission.

Pricing came in line with price talk for a coupon of 0.375%, a reoffer price of 99.5 and an initial conversion premium of 27.5%, according to a market source.

The yield to maturity was 0.439%.

The deal was wall-crossed, a market source said.

Proceeds will be used to exchange $493.4 million of the outstanding 1% convertible notes due 2025 in cash and aggregate amount of 2.16 million shares of common stock in individually negotiated transactions.

The new paper was wrapped around par in secondary trading, a market source said. More than $17 million of the bonds were on the tape about one hour into Wednesday’s session.

The 1% convertible notes were also active. The 1% notes were changing hands around 133.5 with more than $4 million on the tape, a market source said.

Exact Sciences stock was down slightly early Wednesday. Stock was $86.06, a decrease of 1.74%, shortly before 11 a.m. ET.

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