Morning Commentary: Sucampo sells upsized 3.25% convertible notes; issue jumps in active trading

By Stephanie N. Rotondo

Seattle, Dec. 21 – The convertible bond primary market wasn’t quite done for the year, as Sucampo Pharmaceuticals Inc. brought an upsized $260 million of 3.25% convertible senior notes due 2021 on Wednesday.

The deal came with an initial conversion premium of 25%, compared to the 25% to 30% talk. The yield was talked in a 2.75% to 3.25% range.

Leerink Partners ran the books on the Rule 144A offering. The deal came upsized from $225 million.

A trader said that the new issue was making up the bulk of the day’s total trading volume. Of the $118 million in convertible bonds that had traded by mid-morning, he said $64 million was Sucampo.

He pegged the paper at 103.125 bid, 103.6.25 offered versus a stock price of $12.85.

“Everything does well,” the trader said of the new securities, citing the market’s hefty appetite for new deals. He also noted that it was “normal” for the stock to decline in the wake of a new issue.

“Guys were probably shorting this yesterday,” he said.

The bonds are convertible into class A common stock at a rate of 60.2637 shares per each $1,000 of notes. That represents a share price of $16.59, a 25% premium over Tuesday’s closing share price of $13.275.

Proceeds will be used to pay down a credit facility and for general corporate purposes.

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