Pluralsight offering on tap; Fortive convertibles dominate secondary; Guidewire expands

By Abigail W. Adams

Portland, Me., March 4 – The convertible primary market continued to roll out new deals despite a volatile day for the markets on Monday.

Pluralsight, Inc. plans to price $450 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.375% to 0.875% and an initial conversion premium of 30% to 35%, according to a market source.

Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC are the active bookrunners for the Rule 144A offering, which carries a greenshoe of $67.5 million.

The convertible notes offering will price concurrently with an underwritten offering of 13,558,464 common shares from selling stockholders, of which the company will receive no proceeds.

Meanwhile, the secondary space was active on Monday as equity markets saw a volatile session, although there were few notable price movements, sources said.

Fortive Corp.’s 0.875% convertible notes due 2022 continued to dominate trading activity, accounting for nearly 20% of the total trading volume by the late afternoon.

IAC FinanceCo Inc.’s 0.875% convertible notes due 2022 were also active although the notes were trading largely in line.

Guidewire Software Inc.’s 1.25% convertible notes due 2025 saw a slight dollar-neutral expansion as stock sank following an analyst downgrade.

Aegerion Pharmaceuticals Inc.’s 2% senior notes due Aug. 15, 2019, an off-the-run name that rarely trades, saw some action on Monday with the notes trading with a yield to maturity of more than 91%.

Equity markets were volatile on Monday, launching the day strongly on optimism surrounding a pending U.S.-China trade deal but cratering as the session progressed.

The Dow Jones industrial average closed the day down 206.67 points, the Nasdaq closed the day down 0.23% and the S&P 500 index closed the day down 0.39%.

Fortive dominates

Fortive’s 0.875% convertible notes due 2022 continued to dominate the secondary space with the notes accounting for more than 20% of the total trading volume during Monday’s session.

The notes continued to expand in the high-volume activity.

The 0.875% notes were changing hands around 105.125.

They were expanded about 0.5 point dollar-neutral, a market source said.

More than $21 million of the bonds were on the tape early in the session and more than $100 million had changed hands by the late afternoon.

Fortive stock was up slightly on Monday but closed the day largely flat at $82.58, an increase of 0.02%.

“These notes are always going to trade and they’re always going to trade rich,” a market source said.

While Fortive continued to dominate the convertibles secondary space, the industrial conglomerate entered into a $1 billion 364-day delayed-draw term loan facility, Prospect News reported.

Fortive priced $1.44 billion of the convertible notes in late February with proceeds to be used to fund a portion of the acquisition of the Advanced Sterilization Products business from Johnson & Johnson subsidiary Ethicon, Inc.

The acquisition was valued at $2.7 billion.

IAC active

IAC’s 0.875% convertible notes due 2022 also saw some high-volume activity on Monday although with little movement in price, a market source said.

The 0.875% notes were changing hands around 147.25. They were moving largely in line on a dollar-neutral basis, a market source said.

More than $30 million of the bonds changed hands during Monday’s session.

IAC stock closed Monday at $210.94, a decrease of 1.78%.

There was no clear reason for the trading activity, a market source said.

Guidewire expands

Guidewire’s 1.25% convertible notes due 2025 saw a slight dollar-neutral expansion as they dropped outright alongside stock on Monday.

The 1.25% convertible notes were changing hands at 102.5 bid, 103 offered in the mid-afternoon.

They were expanded 0.25 point dollar-neutral, a market source said.

Guidewire stock traded as low as $84.19 on Monday but closed the day at $86.35, a decrease of 7.77%.

Stock tanked after an analyst downgrade from Piper Jaffray in the run up to the software company’s earnings report.

Piper Jaffray downgraded the company to “neutral” from “overweight” and set a new price target of $90 on the stock from the previous $95.

Guidewire will report earnings on Wednesday after the market close.

Aegerion’s yield

Aegerion Pharmaceuticals’ 2% senior notes due Aug. 15, 2019 saw some action on Monday. The off-the-run issue is rarely seen on the tape, sources said.

The notes were changing hands at 71.75. They were trading with a yield to maturity of 91.75%, a market source said.

“I think there might be some issues,” the source said.

The market is most likely anticipating bankruptcy with a recovery of 70% of par, a market source said.

Aegerion priced a $300 million issue of the 2% notes in 2014 when stock was trading around $30.50, according to Prospect News data.

However, the company’s stock soon fell to penny stock territory and the struggling pharmaceutical company merged with QLT to form Novelion Therapeutics in 2016.

Novelion Therapeutics closed Monday at $1.16, a decrease of 2.52%.

Mentioned in this article:

Aegerion Pharmaceuticals Inc. Nasdaq: NVLN

Fortive Corp. NYSE: FTV

Guidewire Software Inc. NYSE: GWRE

IAC FinanceCo Inc. Nasdaq: IAC

Pluralsight Inc. Nasdaq: PS

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