OPKO Health convertibles price, drop below par on debut; PG&E active; Cytokinetics gains

By Abigail W. Adams

Portland, Me., Jan. 5 – The convertibles primary market opened for business in the first trading week of 2024 with the first of what sources expect to be many refinancing deals.

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

OPKO Health’s offering was small and clubby with the deal largely limited to holders of its outstanding notes.

The new paper was quiet in the secondary space as stock, which was destroyed on the heels of the new offering, continued to plunge.

While the notes that did trade fell well below par, they held up on hedge, a source said.

The convertibles secondary space was quiet in general on Friday on a volatile day for equity and Treasury markets after the release of the latest U.S. nonfarm payrolls report.

Markets appeared poised for a sell-off following the report’s release. However, they roared back with equity indexes making large gains in intraday activity.

However, equity indexes leaked into the close to end Friday’s session either side of unchanged.

The Dow Jones industrial average closed Friday up 26 points, or 0.07%, the S&P 500 index closed up 0.18%, the Nasdaq Composite index closed up 0.09% and the Russell 2000 index closed down 0.34%.

There was $337 million in reported convertible bond trading volume in the late afternoon with few notable movements in the space.

PG&E Corp.’s 4.25% secured convertible notes due 2027 were active although with little movement in price.

Cytokinetics Inc.’s 3.5% convertible notes due 2027 continued to gain on an outright basis although the notes were largely moving in line dollar neutral.

OPKO below par

OPKO priced $200 million of five-year convertible notes after the market close on Thursday at par with a coupon of 3.75% and an initial conversion premium of 26.83%.

Pricing came at the cheap end of talk for a coupon of 3.25% to 3.75% and toward the cheap end of talk for an initial conversion premium of 25% to 30%.

The deal was the first of what many expect to be many refinancing deals to price in 2024.

Approximately $146.3 million of net proceeds and cash on hand will be used to repurchase for cash $144.4 million in principal of the company’s outstanding 4.5% convertible notes due 2025.

OPKO Health’s offering was small and clubby with the deal largely limited to holders of the outstanding notes.

Stock got destroyed on the heels of the new offering and continued to plunge on Friday.

However, the new 3.75% notes held up well amid the continued destruction in stock.

The notes traded around par early in the session.

They were seen trading around 99.625 about one hour after the opening bell.

However, sellers dissipated as the notes fell further below par, a source said.

They were marked at 97.25 versus a stock price of $0.89 in the late afternoon.

There was about $12 million in reported volume, which was not much for a new issue, a source said.

The company’s 4.5% convertible notes due 2025 were also active on the buyback with the notes trading around 99.25.

OPKO’s stock traded to a low of $0.85 and a high of $0.95 before closing at $0.89, a decrease of 2%.

Stock sank almost 30% on Thursday after the convertible notes offering was announced.

PG&E active

PG&E’s 4.25% convertible notes due 2027 were among the top traded names during a quiet session on Friday although with little movement in price.

The 4.25% notes were trading around 103.75 versus a stock price of $17.71 in the late afternoon, according to a market source.

There was $13 million in reported volume.

PG&E’s stock traded to a low of $17.64 and a high of $17.90 before closing at $17.89, down 1.02%.

Cytokinetics up outright

Cytokinetics’ 3.5% convertible notes due 2027 continued to march higher alongside stock on Friday.

The notes climbed another 6 points outright with stock up about 6%.

They were trading at 191 versus a stock price of $90.98 in the late afternoon, according to a market source.

However, the notes were largely moving in line dollar neutral.

There was $9 million in reported volume.

Cytokinetics’ stock traded to a low of $86.82 and a high of $95.61 before closing at $93.73, up 6.22%.

The notes made explosive gains in the final trading sessions of 2023 after the company released positive clinical results for a heart disease treatment.

Sources widely expect the company to be acquired with an announcement anticipated during the JPMorgan health care conference next week.

Mentioned in this article:

Cytokinetics Inc. Nasdaq: CYTK

OPKO Health Inc. Nasdaq: OPK

PG&E Corp. NYSE: PCG

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