Luckin Coffee, Alibaba exchangeables on deck; Apellis expands ‘massively’; Clovis mixed

By Abigail W. Adams

Portland, Me., Jan. 7 – The convertibles primary market returned to action on Tuesday with two deals launching after the market close.

J.P. Morgan Chase Bank, NA plans to price $500 million three-year cash-settled bonds exchangeable for Alibaba Group Holding Ltd. shares after the market close on Wednesday.

Price talk is for a fixed coupon of 0.125%, a fixed exchange premium of 20% and an offer price of 109.5, according to a market source.

J.P. Morgan Securities LLC is bookrunner for the Rule 144A offering, which carries a greenshoe of $50 million.

Luckin Coffee Inc. plans to price $400 million of five-year convertible notes before the end of the week with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC are bookrunners for the Rule 144A and Regulation S convertible notes offering, which carries a greenshoe of $60 million.

The notes are pricing concurrently with a 12 million secondary offering of American Depositary Shares.

Despite a lack of new paper, the convertible secondary space was active on Tuesday with investors ready and willing to put money to work.

Offers-wanted-in-competition lists were circulating the market and there was a significant uptick in trading volume with $550 million in reported volume by the late afternoon, according to a market source.

Apellis Pharmaceuticals Inc.’s 3.5% convertible notes due 2026 were in focus with the convertible notes seeing a massive expansion following positive results from a clinical trial, a market source said.

Clovis Oncology Inc.’s convertible notes were mixed following the company’s buyback of about half of the outstanding amount of its 4.5% convertible notes due 2024.

While the 4.5% convertible notes sank as a result of the buyback, the company’s longer duration 1.25% convertible notes due 2025 improved.

Booking Holdings Inc.’s convertible notes continued to see heavy trading volume in the secondary space although the notes were largely moving sideways.

Apellis expands

Apellis Pharmaceuticals’ 3.5% convertible notes due 2026 dominated activity in the secondary space with the notes expanding “massively” following positive results from a clinical trial, a market source said.

The 3.5% convertible notes rose more than 20 points outright.

Sources pegged the notes’ expansion on a dollar-neutral, or hedged, basis between 5 to 7.5 points.

The notes traded as high as 140 early in the session with stock up almost 50%. They were changing hands around 123 into the late afternoon as stock came in.

Apellis stock traded as high as $42.48 and as low as $34.61 before closing the day at $38.73, an increase of 28.29%.

Apellis stock soared following positive clinical results for the pharmaceutical company’s experimental treatment for rare blood diseases.

Clovis mixed

Clovis Oncology’s convertible notes were mixed after the company bought back about half of the outstanding amount of its 4.5% convertible notes due 2024.

The 4.5% convertible notes sank on an outright basis alongside stock after the company announced it was issuing new shares in exchange for some of the convertible notes.

The notes, which are held primarily by outright accounts due to the difficulties with the borrow, dropped 15 points to 124.5.

The 4.5% convertible notes were one of the greatest comeback stories of 2019 with the notes trading in the low 60s in October 2019 but trading up to 180 in early December as stock ripped.

While the 4.5% notes sank after news of the buyback, Clovis’ 1.25% convertible notes due 2025 improved.

The 1.25% convertible notes rose 3 to 4 points to 65.

The 1.25% convertible notes priced in 2018 and “got primed,” or pushed down in the capital structure, when the shorter duration 4.5% convertible notes priced in 2019, a market source said.

While Clovis’ convertible notes do not trade on hedge, stock was taking a hit on Tuesday.

Stock traded as low as $8.20 before closing the day at $8.47, a decrease of 8.43%.

Clovis announced prior to the market open that it sold 17,777,679 shares to some holders of its 4.5% convertible notes at $9.25 per share.

Proceeds from the share sale were used to purchase $123.4 million of its 4.5% convertible notes from those holders, according to a company news release.

Following the transaction, $139 million of the 4.5% convertible notes remained outstanding.

In addition to the convertible buyback, Clovis announced preliminary fourth-quarter revenue and sales figures on Tuesday.

Sales of Clovis’ flagship product Rubraca were between $38.3 million and $39.3 million in the fourth quarter and $142 million and $143 million in 2019, according to a company news release.

Volume movers

Booking Holdings’ convertible notes continued to see heavy trading volume on Tuesday although with little movement in price.

The soon-to-mature 0.35% convertible notes due June 15, 2020 saw more than $25 million in reported volume during Tuesday’s session.

While active, the notes were largely moving sideways, a market source said. They were changing hands at 155.5 with stock largely flat.

The 0.9% convertible notes due 2021 also remained major volume movers with about $15 million on the tape. The notes were changing hands around 116.375.

Booking’s stock closed Tuesday at $2,068.05, an increase of 1.01%.

Booking’s convertible notes have been heavy volume movers for the past few weeks.

Mentioned in this article:

Alibaba Group Holding Ltd. NYSE: BABA

Apellis Pharmaceuticals Inc. Nasdaq: APLS

Booking Holdings Inc. Nasdaq: BKNG

Clovis Oncology Inc. Nasdaq: CLVS

Luckin Coffee Inc. Nasdaq: LK

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