Fortive convertibles dominate, expand; Vipshop eyed; BioMarin active pre-earnings

By Abigail W. Adams

Portland, Me., Feb. 21 – The convertible secondary space saw another day of high trading volume. However, activity was centered on one name – Fortive Corp.

Fortive’s 0.875% convertible notes due 2022 continued to expand in heavy trading volume in the secondary space with the investment-grade paper in high demand.

With no new convertible bond deals announced on Thursday, Fortive was poised to be the sole convertible bond deal of the week.

However, the size of the $1.25 billion deal made Fortive’s 0.875% notes not only the largest deal of 2019 but the Feb. 19 week the highest volume week for new paper in 2019.

Outside of Fortive, few names saw concentrated trading activity, sources said.

Vipshop Holdings Ltd.’s 1.5% convertible notes due March 15, 2019 were active after the Guangzhou, China-based e-commerce company reported fourth-quarter earnings.

BioMarin Pharmaceutical Inc.’s 1.5% convertible notes due 2020 also saw a fresh round of activity in the run-up to the biotech company’s earnings report.

Fortive expansion continues

Fortive’s 0.875% convertible notes continued their expansion in high-volume activity on Thursday.

The notes traded around 103.75 early in the session and climbed to 104 by the late afternoon.

They were expanded another 0.5 points dollar-neutral after a 3.5 point expansion on their market debut Wednesday.

Fortive stock was down slightly on Thursday, closing the day at $80.61, a decrease of 0.56%.

The notes continued to account for the majority of trading activity in the secondary space.

The new paper from Fortive accounted for $58 million of the $103 million on the tape a little over one hour into Thursday’s session and had risen to over $120 million by the late afternoon.

“They’re pretty much what’s going on today,” a market source said.

The activity was not unusual given the $1.25 billion size of the deal.

The notes continued to be sought after by European buyers, who were driving a good portion of the trading activity, a market source said.

Despite modeling out to fair value at the midpoint of talk and pricing rich, the investment-grade status of the paper was driving the trading levels, sources said.

“They’re pretty much always going to trade rich,” a market source said.

Vipshop maturity eyed

While the new paper from Fortive remained in focus, Vipshop Holdings’ 1.5% convertible notes due March 15, 2019 were also active.

The notes were changing hands around 99.5 with about $7 million of the bonds on the tape during Thursday’s session, according to a market source.

The trading activity was largely a cash alternative play with the maturity of the notes about three weeks away, the source said.

While the soon-to-mature notes were not trading on a delta, Vipshop’s stock tanked on Thursday following the Guangzhou, China-based e-commerce company’s fourth-quarter earnings.

Vipshop stock traded as low as $6.00 but closed Thursday at $6.30, a decrease of 13.82%.

Vipshop missed on both the top and bottom lines in its fourth-quarter earnings report.

Vipshop reported earnings per share of 15 cents, which missed analyst expectations for earnings per share of 18 cents.

Revenue of $3.8 billion missed analyst expectations for revenue of $3.96 billion.

The 1.5% notes currently have $629.38 million outstanding.

However, Vipshop entered into a term loan facility agreement in 2017 with money from the term loan to be used for the repurchase of the 1.5% convertible notes.

BioMarin active

BioMarin’s 1.5% convertible notes due 2020 saw a fresh round of activity in the run-up to the biotech company’s fourth-quarter earnings report.

The 1.5% notes were down slightly as stock dipped. They were changing hands around 113.75, according to a market source.

BioMarin stock traded as high as $91.32 during Thursday’s session but closed the day at $88.81, a decrease of 2.04%.

More than $6 million of the bonds were on the tape by the late afternoon.

Mentioned in this article:

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Fortive Corp. NYSE: FTV

Vipshop Holdings Ltd. NYSE: VIPS

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