OPKO on tap; Micron contracts on call news; Aurora Cannabis expands; Weatherford better

By Abigail W. Adams

Portland, Me., Feb. 4 – The convertibles primary market launched the first deal of the month on Monday.

OPKO Health, Inc. plans to price $200 million of six-year convertible notes after the market close on Monday at par with a coupon of 4.5% and an initial conversion premium of 20%, according to a market source.

The terms appeared to be fixed with the deal most likely a bought deal, sources said.

While the markets have been on the mend after a brutal fourth quarter, new deal activity has been light in the midst of earnings season.

However, the spigots are expected to open once earnings season draws to a close, sources said.

Meanwhile, trading volume was light in the secondary space on Monday with the week off to a slow start.

The market was abuzz after Micron Technology Inc. announced it would be calling its 3% convertible notes due 2043. The convertibles notes saw a large dollar-neutral contraction in the wake of the call announcement.

Aurora Cannabis Inc.’s 5.5% convertible notes due 2024 saw a large dollar-neutral expansion on Monday as stock soared on company news.

Western Digital Corp.’s 1.5% convertible notes due 2024 were again the major volume movers of the secondary space with the notes improving slightly on an outright basis.

While not as active as they were on Friday, Weatherford International Ltd.’s 5.875% convertible notes due 2021 continued to improve on Monday with stock continuing its upward momentum.

Micron’s call

Micron announced prior to the market open on Monday that it would retire its 3% convertible notes due 2043 with proceeds from a new split-rated senior notes offering.

The news sent the 3% notes tumbling on a dollar-neutral basis. The notes were contracted 1.5 points dollar-neutral, a market source said.

They closed the day at 133.3. Micron stock closed Monday at $39.47, a decrease of 0.33%.

The 3% notes currently have $1.025 billion outstanding, according to Trace data.

They have been callable at par since Nov. 20, 2018 subject to a 130% hurdle.

The notes are convertible prior to redemption with the company expecting to pay $1.38 billion to cover the full conversion of the notes.

The redemption of the 3% notes is a blow not only to those that play the name, but also to the greater convertibles universe.

The 3% notes were a large liquid issue from a large cap company and their redemption may contribute to a contracted convertibles market in 2019, sources said.

Aurora expands

Aurora Cannabis’ 5.5% convertible notes due 2024 saw large gains on both an outright and dollar-neutral basis as stock soared on Monday.

The 5.5% notes rose more than 6.5 points outright to close Monday at 121.625 after trading as high as 123, sources said.

The notes were expanded about 1.5 to 2 points dollar-neutral.

Aurora stock climbed as much as 10% during Monday’s session and closed the day at $8.04, an increase of 8.65%.

Stock soared on Monday after the company announced its partner Radient Technologies received a processing license from Health Canada.

The license for the proprietary-extraction technology places Aurora in a solid position to expand its production of extraction-based products, such as vape pen solutions, soft gels, edibles and beverages, the company said in a press release.

Western Digital active

Western Digital’s 1.5% convertible notes due 2024 were again major volume movers in the secondary space with more than $12 million of the bonds changing hands during Monday’s session.

The notes were slightly improved on an outright basis. They traded up about 0.75 point to 86.875.

Western Digital stock made nominal gains during Monday’s session. Stock traded up to $47.85, an increase of 1.81%.

Western Digital’s convertible notes and stock have been active and on the rise since the data storage company’s second-quarter earnings report in late January.

Weatherford improves

While activity surrounding the notes tempered, Weatherford’s 5.875% convertible notes due 2021 continued to improve alongside stock on Monday.

The 5.875% convertible notes rose another 0.375 point outright to close Monday at 74.75.

Weatherford stock continued its upward momentum closing Monday at $0.90, an increase of 17.27%.

Weatherford’s convertible notes were major volume movers in the secondary space on Friday with the notes jumping more than 6 points outright as stock soared following the oilfield services company’s fourth-quarter earnings.

While the company continued to post losses, it made a significant dent in its leverage during 2018 and posted free cash flow of $65 million.

Mentioned in this article:

Aurora Cannabis Inc. NYSE: ACB

Micron Technology Inc. Nasdaq: MU

OPKO Health, Inc. Nasdaq: OPK

Weatherford International Ltd. NYSE: WFT

Western Digital Corp. Nasdaq: WDC

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