OPKO convertible offering eyed; refinancing wave begins; Cytokinetics rally continues

By Abigail W. Adams

Portland, Me., Jan. 4 – The convertibles primary market reactivated in the first few trading sessions of 2024 with one new offering on deck.

OPKO Health Inc. plans to price $200 million of five-year convertible notes after the market close on Thursday.

The refinancing deal modeled cheap but was a “clubby” offering mostly spoken for by existing holders.

The first new deal of 2024 was a continuation of the exchange-type transactions that have fueled new deal activity over the past year, sources said.

The trend is expected to continue in 2024 with refinancings driving a faster pace of issuance.

Distressed debt exchanges are also expected to be plentiful in the coming year as the pandemic darlings that issued convertible notes in 2020 and 2021 address their looming maturities.

fuboTV was the first to announce such an exchange on Tuesday.

Meanwhile, it was another active session in the convertibles secondary space with equity indexes either side of unchanged after a heavy start to the year.

The Dow Jones industrial average closed Thursday up 10 points, or 0.03%, the S&P 500 index closed down 0.34%, the Nasdaq Composite index closed down 0.56% and the Russell 2000 index closed down 0.02%.

There was $507 million in reported convertible bond trading volume in the late afternoon with high-grade names continuing to dominate the tape.

Cytokinetics Inc.’s 3.5% convertible notes due 2027 resumed their rally from the previous week with the company a strong takeover candidate on the heels of positive clinical results.

OPKO eyed

OPKO Health plans to price $200 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 25% to 30%.

The deal was heard to be in the market with assumptions of 800 basis points over SOFR and a 40% vol.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of talk, a source said.

The first deal to hit the market in 2024 was coming as a refinancing with proceeds to be used to repurchase a portion of the 4.5% convertible notes due 2025 in privately negotiated transactions.

The offering was a small and “clubby” deal that was largely limited to the holders of the outstanding notes, a source said.

The company is a dollar stock with a market cap of $711.21 million.

The convertible notes offering sparked heavy selling in the stock on Thursday, which closed at $0.91, a decrease of 39.55%.

The 4.5% notes last traded at 98.5 in early December, according to Trace data.

fuboTV’s exchange

Refinancings and distressed debt exchanges are expected to be plentiful in the coming months as the pandemic darlings that issued convertible notes in 2020 and 2021 address their looming maturities.

fuboTV launched the first such exchange of 2024 on Tuesday.

The company announced a privately negotiated exchange of $205,835,000 in principal of its 3.25% convertible senior notes due 2026 with holder Mudrick Capital Management, LP.

The 3.25% convertible notes due 2026 were exchanged for $177,506,000 in principal of new convertible notes due 2029 that will carry a 7.5% cash interest payment or a 10% payment in kind, Prospect News reported.

fuboTV issued $402.5 million of the 3.25% convertible notes in January 2021.

The notes were wrapped around 70 with a yield of about 21% in mid-December.

Cytokinetics resumes rally

Cytokinetics’ 3.5% convertible notes due 2027 resumed their rally on Thursday after the explosive gains of the previous week.

The 3.5% notes added another 6 points outright with stock up about 1.5%.

They were trading at 185.375 versus a stock price of $87.96 in the late afternoon, according to a market source.

There was $12 million in reported volume.

Cytokinetics’ stock traded to a low of $85.80 and a high of $90.22 before closing at $88.24, up 1.85%.

The 3.5% convertible notes surged 75 points outright as stock added 80% last week following positive clinical results for a heart disease treatment.

The notes gained about 7 points dollar-neutral on the move up.

The biotech is a strong takeover candidate with an announcement about an acquisition expected to come during the JPMorgan health care conference next week, a source said.

Mentioned in this article:

Cytokinetics Inc. Nasdaq: CYTK

fuboTV NYSE: FUBO

OPKO Health Inc. Nasdaq: OPK

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