New convertible paper quiet; Clovis contracts; Ionis, NXP in focus in secondary market

By Abigail W. Adams

Portland, Me., April 20 – The convertibles primary market priced $1.07 billion of new paper over the past week, breaking last week’s lull. However, the new paper was slow to trade on Friday.

Ship Finance International Ltd.’s newly priced 4.875% notes due 2023 remained active but contracted on Friday, market sources said, after coming in about 1 point dollar neutral on their market debut on Thursday.

South Jersey Industries, Inc.’s 7.25% mandatorily convertible equity units due 2021 maintained their expansion on Friday and were seen up about 0.75 point dollar neutral, a market source said.

Paratek Pharmaceuticals, Inc.’s 4.75% convertible notes due 2024 were not seen on the tape on Friday. The notes were last seen trading up to 101 on Thursday as its stock dropped more than 15%.

The drop in stock was widely anticipated and was why the deal was priced so cheap, market sources said.

While well received on their market debut, Clovis Oncology, Inc.’s recently priced 1.25% convertible notes due 2025 were seen contracted about 1.5 points on a dollar-neutral basis on Friday after expanding on their market debut.

As new paper moved out of focus, trading activity zeroed in on Ionis Pharmaceuticals’ 1% convertible notes due 2021.

Ionis’ notes jumped about 3 points outright as stock rose more than 5% after the pharmaceutical company announced an expanded partnership with Biogen to develop medication for neurological diseases.

NXP Semiconductors NV’s 1% convertible notes due 2019 were also in focus on Friday. The notes continued to trade in the 117 to 119 range on Friday after dropping 4 points on Thursday.

NXP stock was down another 1.88% on Friday after a 5% slide on Thursday after Qualcomm’s takeover bid of the company was challenged by Chinese regulators.

Day two

Ship Finance’s 4.875% convertible notes rallied a little on Friday but were still seen contracted dollar neutral, market sources said.

The 4.875% notes were seen trading at 98.5 early Friday with the stock down 1%. The notes “looked a little firmer” to trade at 99 with the stock flat at $14.05 later in the afternoon.

With a theoretical delta of 75%, the notes should have seen an expansion with the 5% drop in stock on Thursday. However, the notes were pushed out about 2.25 points at pricing, a market source said.

Despite the rally Friday afternoon, the notes were still seen coming in dollar neutral.

The 4.875% notes were seen contracted about 1 point dollar neutral on their debut on Thursday, sources said.

South Jersey Industries’ 7.25% mandatorily convertible equity units due 2021 maintained their expansion on Friday.

The par of $50 units were seen trading at $50.90, a 10 cent decrease from Thursday, with the common stock up about 0.60%.

The units closed Friday at $51.00. South Jersey Industries common stock closed Friday at $30.02, an increase of 0.67%.

The units were seen expanded about 0.75 point mid-afternoon, a market source said.

Paratek Pharmaceuticals’ 4.75% convertible notes due 2024 were not seen trading during Friday’s session. The notes were last seen trading at 101 on Thursday as its stock dropped more than 15%.

“It was an overnight deal,” a market source said. “It was assumed the stock would drop.” The deal was marketed with a credit spread of 700 bps and a 45% vol.

With the convertible note offering more than 1/3 of Paratek’s market cap, there were going to be a lot of shares for sale, a market source said.

The anticipated drop in stock is why Paratek’s convertible note was priced as cheap as it was.

“It was dirt cheap for a reason,” the source said.

New paper from Paratek, South Jersey Industries and Ship Finance made their market debut on Thursday.

Clovis contracts

Clovis Oncology’s recently priced 1.25% convertible notes due 2025 were seen contracted about 1.5 points on a dollar-neutral basis on Friday after expanding on their market debut on Tuesday.

The 1.25% notes were seen trading in the low 97 range on Friday after dropping below par on Thursday with stock off more than 5%. Clovis stock closed Friday at $50.17, a decrease of 2.24%.

The notes were up 1.25 points dollar neutral on their market debut on Tuesday.

Clovis stock has “taken a pretty ugly move down in the last two weeks,” a market source said.

The drop in the 1.25% notes may be the result of “outrights punting,” the source said.

Ionis climbs

Ionis Pharmaceuticals’ 1% convertible notes due 2021 climbed alongside its stock on Friday after the company announced a 10-year collaboration with Biogen to develop drugs to treat neurological diseases.

The 1% convertible notes traded in a range of 104 to 105 on Friday as stock wavered between a high of $50.44 and low of $46.77. Ionis stock closed Friday at $48.51, an increase of 5.8%.

Biogen will pay Ionis $1 billion, which includes $625 million to buy 11.5 million shares of Ionis stock at $54.34 per share, under the terms of the deal, Forbes reported.

Biogen and Ionis previously collaborated to develop Spinraza, a treatment for spinal muscular atrophy.

NXP active

NXP Semiconductors’ 1% convertible notes due 2019 also saw high-volume trading during Friday’s session.

The 1% notes were trading in a range of 117 to 119 on Friday as stock wavered between $103.00 and $108.00. NXP stock closed Friday at $105.15, a decrease of 1.88%.

NXP’s convertible notes and stock have slid since Thursday after Qualcomm initiated a round of layoffs to cut $1 billion in operational expenses.

Qualcomm’s bid to acquire NXP experienced another setback, with regulators in China expressing concern about the deal.

Qualcomm announced April 16 that it would refile its application with the Chinese government.

Qualcomm’s long-delayed acquisition of NXP has received approval from eight of nine regulators with China the last approval needed.

Mention in this article:

Clovis Oncology, Inc. Nasdaq: CLVS

Ionis Pharmaceuticals Nasdaq: IONS

NXP Semiconductors NV Nasdaq: NXPI

Paratek Pharmaceuticals, Inc. Nasdaq: PRTK

Ship Finance International Ltd. NYSE: SFL

South Jersey Industries, Inc. NYSE: SJI

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