OPKO Health’s new convertible notes hit the market, trade at par; Illumina active

By Abigail W. Adams

Portland, Me., Feb. 5 – Tuesday opened with new paper entering the secondary space, spurring trading activity which had been light at the start of the week.

OPKO Health, Inc. priced $200 million of six-year convertible notes prior to the market open on Tuesday.

The new paper was largely wrapped around par in the high-volume activity, although the notes saw a marked improvement in the late afternoon.

While the new paper was in focus, Illumina Inc.’s 0.5% convertible notes due 2021 outpaced the new paper from OPKO with the notes expanding dollar-neutral.

All three of Illumina’s tranches saw high-volume activity on Tuesday.

Outside of the biotech/health care sectors, Tesla Inc.’s 1.25% convertible notes due 2021 saw a smattering of trades with the notes slightly expanded as stock continued to tick upward.

OPKO dominates

OPKO Health priced $200 million of six-year convertible notes prior to the market open on Tuesday at par with a coupon of 4.5% and an initial conversion premium of 20%.

Pricing came in line with talk for a coupon of 4.5% and an initial conversion premium of 20%.

In connection with the offering, OPKO Health entered into a share lending agreement for a total of up to 30 million shares.

The overnight deal was largely a bought deal, sources said.

The new notes were major volume movers in the secondary space with $22 million on the tape about one hour into the trading session and estimated volume at about $50 million, a market source said.

More than $30.5 million of the bonds were on the tape by the late afternoon.

The notes were largely wrapped around par for the majority of Tuesday’s session. They were seen at 100 bid, 101 offered shortly before 11 a.m. ET.

However, the notes saw a drastic improvement in the late afternoon as stock rebounded from its lows.

The notes were seen changing hands at 102 versus a stock price of $2.92 about one hour before the closing bell and traded up to 102.5 before the market close, sources said.

The majority of trades were outright with only a few on swap, a source said.

While the notes saw a large dollar-neutral expansion based off of Monday’s closing price, the decrease in stock was already priced into the notes, sources said.

However, the notes were still trading cheap to fair value in secondary trading.

OPKO stock took a hit after the convertible notes offering was announced with stock down in after-hours trading and during Tuesday’s session.

Stock was down almost 19% on Tuesday but rallied to close the day at $2.96, a decrease of 15.91%.

OPKO Health has had an illustrious history and is a controversial name within the investment community, sources said.

Illumina active

While focus was on new paper from OPKO Health, Illumina’s three tranches of convertible notes saw high-volume trading activity with the 0.5% convertible notes due 2021 outpacing the new paper on the tape.

Illumina’s 0.5% convertible notes were expanded slightly in the high-volume activity. The notes were seen changing hands at 127.721 versus an equity price of $280.65 in the late afternoon.

They were expanded about 0.25 point dollar-neutral, a market source said.

More than $35 million of the bonds were on the tape by the late afternoon.

Illumina’s 0% convertible notes due June 15, 2019 also saw high-volume activity.

The notes continued to trade around 114.5 with about $25 million of the bonds on the tape by the late afternoon.

Illumina’s 0% convertible notes due 2023 were the least active of the three tranches but still major volume movers in the secondary space.

The 0% convertible notes due 2023 hit the bid in late afternoon trade of 101.8, a market source said. More than $10 million of the bonds changed hands by the late afternoon.

While all three tranches of convertible notes were active, Illumina stock was largely flat on Tuesday.

Stock closed Tuesday at $281.76, an increase of 0.26%.

There was no news to drive the trading activity, sources said.

Tesla improves

Tesla’s 1.25% convertible notes due 2021 were slightly improved on Tuesday as stock continued its upward momentum.

The notes traded up to 110.25 early in the session and were seen changing hands just south of 111 versus an equity price of $320.17 later in the afternoon.

They were expanded slightly on a dollar-neutral basis, a market source said.

Tesla stock closed Tuesday at $321.35, an increase of 2.7%.

While stock has seen upward momentum over the past few trading days, it is still well short of the $359 conversion price for the 0.25% convertible notes due March 1, 2019.

With the notes in the midst of their 20-day averaging period, there is little likelihood they will be convertible upon maturity.

The 0.25% notes were quiet during Tuesday’s session. They continued to trade around par.

Mentioned in this article:

Illumina Inc. Nasdaq: ILMN

OPKO Health, Inc. Nasdaq: OPK

Tesla Inc. Nasdaq: TSLA

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