Novavax is year’s first new convertible, looks a few points cheap; Chesapeake down

By Rebecca Melvin

New York, Jan. 25 – Novavax Inc.’s planned $200 million of seven-year convertible senior notes looked to have a fair value of about 102 to 103 at the midpoint of talked terms, using a credit spread of 800 basis points over Libor and a 40% vol., according to a market source.

On the heels of the new deal launched early on Monday, shares of the Rockville, Md.-based biotechnology company tanked late in the session, closing down $1.06, or 16%, at $5.56.

The Novavax offering represents the first new deal for the convertibles space this year, and how it prices will be “a tell-tale sign for converts,” the source said.

Meanwhile, the secondary market was pretty quiet, with one source attributing the lagging start on Monday to winter storm Jonas, which struck the U.S. East Coast late last week and into the weekend. But there were some names that registered moves.

SanDisk Corp.’s convertibles fell on an outright basis, but were mixed on a dollar-neutral, or swap basis, as shares dropped after an analyst downgrade of its shares and a report casting doubt on the expected Western Digital Corp. acquisition of the Milpitas, Calif.-based chip storage company.

Chesapeake Energy Corp.’s convertibles were indicated lower along with a 16% drop in the shares of the Oklahoma City-based natural gas producer after the company said Friday it has suspended its dividend payments on its convertible preferred stock to save money to buy back debt.

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