NuVasive convertible offering eyed; Bandwidth expands on debt; Exact Sciences volatile

By Abigail W. Adams

Portland, Me., Feb. 26 – While the volatility that has rocked equities has largely shut down deal making in other markets, the convertibles primary market has remained active with one new deal pricing before the market open and another slated to price after the close.

NuVasive Inc. joined the forward calendar with plans to price $450 million of five-year convertible notes after the market close on Wednesday.

The deal looked cheap based on underwriters’ assumptions. However, with a lower vol. the deal “looked ugly,” a source said.

NuVasive’s 2.25% convertible notes due 2021 were active and coming in following news of the new offering.

Bandwidth Inc. priced an upsized $350 million six-year convertible notes after the market close on Tuesday. While the deal was flat on an outright basis, it was expanding on debut.

Exact Sciences Corp.’s newly priced 0.375% convertible notes due 2028 saw another volatile session with the notes trading up in the morning but closing the day well below par.

Sources were surprised to see the steady stream of new deal activity given the continued volatility in the markets.

However, most of the deals that launched over the past week have come as overnights and may have been the result of pre-marketing.

Issuers may also be concerned the recent volatility may be the beginning of a bear market and are in a rush to price their deals before stocks move lower, a source said.

Outside of new paper, Insulet Corp.’s convertible notes were down outright but up on swap following a mixed fourth-quarter earnings report.

NuVasive eyed

NuVasive plans to price $450 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.375% to 0.875% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The deal was heard to be marketed with assumptions of 250 basis points over Libor and a 32% vol., according to a market source.

Using those assumptions, the deal modeled about 1.5 points cheap at the midpoint of talk, a source said.

The borrow on the stock was also good, the source said.

However, some felt the vol. should be lower. Using a vol. assumption in the high 20s, the deal “looked ugly,” a market source said.

The new offering sparked activity in NuVasive’s 2.25% convertible notes due 2021.

The 2.25% notes were trading just north of 124 late Wednesday afternoon. They were contracted about 0.5 point dollar-neutral, a market source said.

NuVasive stock traded to a high of $71.09 and a low of $67.87 before closing the day at $69.10, a decrease of 2.55%.

Bandwidth expands

Bandwidth priced an upsized $350 million six-year convertible notes after the market close on Tuesday at par with coupon of 0.25% and an initial conversion premium of 32.5%.

Pricing came at the rich end of talk for a coupon of 0.25% to 0.75% and at the midpoint of talk for an initial conversion premium of 30% to 35%, according to a market source.

The greenshoe was also upsized to $50 million.

The initial size of the deal was $300 million with a greenshoe of $45 million.

The new paper was performing well in the secondary space. The 0.25% notes were wrapped around 101 with stock off early in the session.

While the notes dropped back down to par heading into the afternoon, they saw a large dollar-neutral expansion.

The notes were expanded 1.75 points dollar-neutral off of Tuesday’s close, a market source said.

Bandwidth stock traded to a high of $68.14 and a low of $65.50 before closing the day at $65.96, a decrease of 3.99%.

Exact Sciences volatile

Exact Sciences’ newly priced 0.375% convertible notes due 2028 saw another volatile session on Wednesday.

The 0.375% notes traded as high as 102 early in the session with stock rebounding from Tuesday’s losses.

However, the notes cracked as stock reversed course and dived more than 7% heading into the afternoon.

The new 0.375% notes sank as low as 96.75 in the late afternoon, according to a market source.

While well below par, the notes were improving dollar-neutral.

They were expanded as much as 1 point dollar-neutral early in the session.

While the notes erased most of their gains as the session progressed, they were still up by 0.25 point heading into the market close, a source said.

Exact Sciences stock traded to a high of $87.75 and a low of $79.20 before closing the day at $80.76, a decrease of 6.67%.

Insulet’s earnings

Insulet’s convertible notes were down outright but up on swap as stock tanked following a mixed fourth-quarter earnings report.

The company’s 0.375% convertible notes due 2026 dropped about 5 points outright.

They were changing hands at 109.375 by the late afternoon. However, the notes expanded 1.5 points on the move down, a source said.

Insulet’s 1.375% convertible notes due 2024 dropped almost 30 points outright to 208. They were expanded about 0.5 point dollar-neutral.

Insulet stock traded to a high of $198.26 and a low of $179.06 before closing the day at $180.01, a decrease of 8.5%.

The medical device technology company’s stock dived after it missed on earnings.

Insulet reported earnings per share of 8 cents versus analyst expectations for earnings per share of 9 cents.

However, the company beat on the top line with revenue of $209.4 million versus analyst expectations for revenue of $197 million.

Mentioned in this article:

Bandwidth Inc. Nasdaq: BAND

Exact Sciences Corp. Nasdaq: EXAS

Insulet Corp. Nasdaq: PODD

NuVasive Inc. Nasdaq: NUVA

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