Green Plains trades down on debut; YY’s convertible offering eyed; Retrophin contracts

By Abigail W. Adams

Portland, Me., June 19 – The Federal Reserve’s announcement regarding rates and the new deals entering the convertibles universe occupied the attention of market players on Wednesday.

Green Plains Inc. priced an upsized $105 million offering of five-year convertible notes after the market close on Tuesday. The new notes traded well below par on their market debut as stock got hammered.

With the prospects of progress in trade talks between the United States and China, another China-based social media company launched a convertible notes offering.

YY Inc. plans to price an $850 million two-tranche offering of convertible notes after the market close on Wednesday.

The deal looked cheap based on underwriters’ assumptions. However, the credit was described as dicey.

Outside of the new paper, Retrophin Inc.’s 2.5% convertible notes due 2025 were active with the notes gaining outright but dropping on a dollar-neutral, or hedged, basis.

Green Plains trades down

Green Plains priced an upsized $105 million offering of five-year convertible notes after the market close on Tuesday with a coupon of 4% and an initial conversion premium of 25%.

Pricing came on the cheap end of talk for a coupon of 3.5% to 4% and an initial conversion premium of 25% to 30%, according to a market source.

The deal was upsized from $100 million.

The 4% notes were in focus on Wednesday and were trading in a wide range.

While there were several prints around par early in the session, the notes also traded as low as 96.375, a market source said.

They were changing hands between 97.5 and 98 for the majority of the afternoon, a market source said.

The trading activity was largely driven by outright accounts.

The deal was heard to be in the market with a credit spread of 800 basis points over Libor and a 37% vol., which modeled about 6.69 points cheap, a source said.

Other sources pegged assumptions as a credit spread of 750 bps over Libor and a 38% vol., which modeled about 8 points cheap.

However, Green Plains stock got crushed on news the company was suspending its quarterly cash dividend, which was most likely factored in to the pricing of the notes, a source said.

The deal was wall-crossed, a source said.

Proceeds from the offering will be used to refinance $56.8 million of the Omaha-based diversified commodity-processing company’s 3.25% convertible notes due 2019 and also to repurchase up to $40 million in common stock.

The 3.25% convertible notes were also active early Wednesday and were changing hands just shy of 101, a source said.

Green Plains stock was down as much as 15% on Wednesday but pared its losses to close the day at $11.38, a decrease of 8.74%.

YY eyed

YY plans to price an $850 million two-tranche offering of convertible notes after the market close on Wednesday.

The offering consists of a $425 million tranche of six-year convertible notes with price talk for a yield of 0.25% to 0.75% and an initial conversion premium of 35% to 40%.

The offering will also feature a $425 million tranche of seven-year convertible notes with price talk for a coupon of 0.875% to 1.375% and an initial conversion premium of 35% to 40%.

Each tranche carries a greenshoe of $75 million.

Underwriters were heard to be marketing the deal with a credit spread of 450 bps over Libor and a 40% vol. for the shorter duration notes and 500 bps over Libor and a 40% vol. for the longer duration notes.

While ADSs, there was a regular borrow on the company’s equity, sources said.

Sources pegged both tranches between 1 and 2 points cheap.

However, the credit of China-based companies was described as “dicey.”

China-based companies are notorious for drawing down revolvers, which appear as cash on the balance sheets to bolster their financials, a source said.

Determining what is actual cash and what are the proceeds from debt requires some sleuthing, the source said.

Some sources felt the Guangzhou, China-based global social media platform deserved a wider credit spread and pegged assumptions as 550 bps over Libor and 45% vol. for the six-year paper and 600 bps over Libor and a 45% vol. for the seven-year paper.

However, there were valid arguments for both a tighter and wider credit spread, a source said.

While there was some apprehension surrounding YY’s offering, the deal was heard to be in demand during bookbuilding with both tranches reportedly oversubscribed.

The books closed in the mid-afternoon, a source said.

The notes were seen at 100.125 bid, 100.875 offered in the gray market.

Retrophin active

While activity outside the new paper was slow on Wednesday with all eyes on Federal Reserve chairman Jerome Powell’s press conference, Retrophin’s 2.25% convertible notes due 2025 were among the most actively traded issues in the secondary space.

The 2.25% convertible notes gained about 1 point outright to trade up to 89.5. However, they were down about 0.5 point dollar-neutral, a market source said.

Retrophin stock was coming in on Wednesday after a rally on Tuesday driven by news of a new partnership.

Stock closed Wednesday at $20.02, a decrease of 1.72%.

The pharmaceutical company announced a new research development agreement to develop potential therapeutics for Alagille Syndrome, a rare genetic disorder, on Tuesday with stock gaining about 3%.

Retrophin was co-founded by the embattled Martin Shkreli, who is serving a seven-year prison sentence for securities fraud.

In May, Shkreli filed suit against the former chief executive officer of Retrophin and two other executives for ousting him from the company in 2014.

Mentioned in this article:

Green Plains Inc. Nasdaq: GPRE

Retrophin Inc. Nasdaq: RTRX

YY Inc. Nasdaq: YY

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