TPG Specialty, Canopy convertibles price; Intelsat up 12 points on week; AMAG in focus

By Abigail W. Adams

Portland, Me., June 15 – Despite an influx of new convertibles paper over the past week, trading volume was relatively light on Friday with activity surrounding recent deals dying down, sources said.

While the $1.29 billion in new paper that debuted on Thursday drifted out of focus, attention turned to the new deals that hit the market on Friday.

TPG Specialty Lending, Inc. priced a $50 million add-on to its 4.5% convertible senior notes due 2022 after the market close on Thursday at the cheap end of talk with a reoffer price of 100.5.

The 4.5% notes were seen trading below the reoffer price early in the session but rallied to close the day above.

Canopy Growth Corp. priced an upsized C$500 million of five-year convertible notes prior to the market open on Friday at the rich end of talk with a coupon of 4.25% and an initial conversion premium of 25%.

While hedging of the deal is difficult, the notes were trading up on an outright basis, a market source said.

AMAG Pharmaceuticals Inc.’s 3.25% convertible notes due 2022 were among the major volume movers of Friday’s session with the notes making gains on a dollar-neutral basis after the company announced its divestiture from its subsidiary, Cord Blood Registry.

Intelsat SA’s newly priced 4.5% convertible notes due 2025 continued to expand on Friday with the notes up 12 points dollar neutral since issuance, a market source said.

While Intelsat’s new convertible notes continued to outperform, Sea Ltd.’s new 2.25% convertible notes due 2023 were backing off their Thursday gains and Restoration Hardware Inc.’s new 0% convertible notes due 2025 and GCI Liberty, Inc.’s 1.75% exchangeable senior debentures due 2046 tied to Charter Communications, Inc. stock were seen contracting their second day in the market.

TPG’s add-on

TPG priced a $50 million add-on to its 4.5% convertible notes due 2022 at the cheap end of talk with a reoffer price of 100.5. Talk had been for a price of 100.5 to 101, according to a market source.

The add-on, which priced shortly after it was announced, spurred some activity in the 4.5% convertible senior notes due 2022 on Friday.

The notes were seen trading below their reoffer price of 100.5 with customers selling the notes for 100.357 early in the session.

However, there were some odd-lot trades on the tape that were higher. “They’ll most likely work their way up,” a market source said.

And they did. The notes were seen trading at 100.625 versus an equity price of $18.08 mid-afternoon.

About $15 million of the bonds had traded by late afternoon.

TPG’s 4.5% notes are a small issuance that do not see much trading action.

While the notes closed Friday above their reoffer price, they are still well below their levels prior to the pricing of the add-on.

The notes were last seen trading at 102.5 two weeks ago, a market source said.

The add-on was most likely the result of a reverse inquiry, a market source previously said.

“It’s a good solid name,” another source said, and there is not much paper from business development corporations in the market.

J.P. Morgan Securities LLC and Goldman Sachs & Co. were joint bookrunners for the add-on. BofA Merrill Lynch and Morgan Stanley & Co. LLC were the bookrunners when the original notes priced in January 2017.

Canopy trades up

Canopy’s offering of five-year convertible notes was in demand during the bookbuilding process and trading up in secondary market activity, according to market sources.

The upsized C$500 million priced at the rich end of talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 20% to 25%, according to a market source.

The initial deal size had been C$400 million. The greenshoe was also upsized to C$100 million from C$60 million.

Hedging of the Rule 144A and Regulation S deal is complicated with the Canadian currency and the difference in the exchanges, sources said.

“It’s a tough borrow,” a market source said. “Guys are finding it difficult to hedge.”

However, the notes were trading up on an outright basis. They were seen at 101.25 bid, 102 offered in the mid-afternoon, a market source said.

AMAG in focus

AMAG Pharmaceuticals’ 3.25% convertible notes due 2022 were in focus on Friday with the notes making gains on a dollar-neutral basis as the company’s stock declined.

The notes were trading in a range of 113.5 to 116 outright as stock wavered between a high of $24.65 and a low of $22.25 during Friday’s session.

The credit spread tightened 75 bps and the notes were expanding 1 to 1.5 points dollar neutral, a market source said.

More than $23 million of the bonds had traded by mid-afternoon making it one of the major volume movers of the day.

AMAG stock closed Friday at $23.80, a decrease of 3.84%.

The movement in the notes came after AMAG announced it would divest Cord Blood Registry to private equity investment firm GI Partners for $530 million in an all-cash sale.

Proceeds will be used to pay off the $475 million outstanding of the company’s 7.875% senior notes due 2023, according to a company news release.

Intelsat expands

Intelsat’s new 4.5% convertible notes due 2025 continued to see gains on an outright and dollar-neutral basis on Friday.

The notes, which priced at par on Monday, were seen trading up to 121 on Friday as the Luxembourg-based communications satellite services provider’s stock continued to climb.

The notes have expanded 12 points dollar neutral since issuance, a market source said.

Intelsat stock closed Friday at $17.59, an increase of 4.52%. Stock has risen about $3 since the convertible notes priced.

Day 2

While Intelsat’s new convertible notes continued to see gains, the new paper that debuted on Thursday was weaker on its second day in the market.

Meanwhile, Sea’s new 2.25% convertible notes due 2023 were flat on an outright basis on Friday but were coming in slightly on swap.

The notes were seen trading at 104.5 versus an equity price of $15.53 in the mid-afternoon. They were down about 0.25 point on swap, a market source said.

The notes expanded about 3 points on their market debut on Thursday.

Trading activity surrounding the notes settled on Friday with $11 million of the bonds on the tape by late afternoon compared to the more than $135 million of bonds that traded on Thursday.

Restoration Hardware’s 0% convertible notes due 2023 made gains on an outright basis with the notes jumping above par as the stock rebounded.

However, the notes continued to contract dollar neutral, a market source said.

The 0% notes were seen trading at 100.272 versus an equity price of $157.13.

However, the notes were contracted another 0.25 point dollar neutral after a 0.25 point contraction on their Thursday debut.

Trading of the new notes was light with only about $4 million of the bonds on the tape, according to a market source.

GCI Liberty’s 1.75% exchangeable senior debentures due 2046 tied to Charter also saw gains on an outright basis but were contracting dollar neutral on Friday.

The notes were up about 1 point to trade at 102 versus an equity price of $297.48. They were coming in about 0.25 point dollar neutral, a market source said.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

Canopy Growth Corp. TSE: WEED, NYSE: CGC

Charter Communications, Inc. Nasdaq: CHTR

Intelsat SA NYSE: I

Restoration Hardware Inc. NYSE: RH

Sea Ltd. NYSE: SE

TPG Specialty Lending, Inc. NYSE: TSLX

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