Repligen on tap; Illumina, Western Digital active; Empire State matures; Tesla rebounds

By Abigail W. Adams

Portland, Me., July 15 – After a week with no primary market activity, one new deal joined the convertibles forward calendar on Monday.

Repligen Corp. plans to price $250 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.375% to 0.875% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

J.P. Morgan Securities LLC is bookrunner for the registered offering, which carries a greenshoe of $37.5 million.

The notes are pricing concurrently with a $100 million common stock offering, which carries a greenshoe of $15 million.

Up to $115 million in proceeds from the concurrent offerings will be used to redeem Repligen’s 2.125% convertible notes due 2021.

Meanwhile, it was a summer Monday in the convertibles secondary space with volume light throughout the session, sources said.

Illumina Inc.’s 0.5% convertible notes due 2021 and Western Digital Corp.’s 1.5% convertible notes due 2024 remained active in the secondary space.

While typically slow to trade, Empire State Realty Trust’s 2.625% convertible notes due Aug. 15, 2019 have seen renewed interest in recent sessions as their due date approaches.

Teva Pharmaceutical Finance Co. LLC’s 0.25% convertible notes due 2026 were active on the tape with the notes moving sideways as stock sold off following an analyst downgrade.

Tesla Inc.’s 2% convertible notes due 2024 were on the rise once again after trading off at the beginning of last week.

Illumina down again

Illumina’s convertible notes were again active in the secondary space as stock continued its downward momentum after slashing its forwarded guidance.

Illumina’s 0.5% convertible notes due 2025 dropped about 2 points outright.

They were changing hands between 133.5 and 134.625 throughout the session, sources said.

More than $13 million of the bonds were on the tape by the late afternoon.

Illumina stock was down to $302.29, a decrease of 0.9%.

Stock continued its downward momentum after plummeting more than 16% on Friday.

Illumina stock has been on the decline since Illumina reduced its full-year guidance and previewed its second-quarter revenue, which missed analyst expectations.

Western Digital active

Western Digital’s 1.5% convertible notes due 2024 were again active on Monday with buyers looking for investment-grade paper, sources said.

The notes were changing hands at 92.875 early in the session and closed the day around 92.75.

More than $9 million of the bonds were on the tape by the late afternoon.

Western Digital stock closed Monday at $54.66, a decrease of 1.16%.

However, the notes were trading for their yield, which was about 3.19%, early in the session, a source said.

In addition to being investment grade, the notes carried a yield, which buyers have been looking for in recent sessions, sources said.

Empire State matures

While historically an illiquid issue, Empire State’s 2.625% convertible notes due Aug. 15, 2019 have been active in recent sessions as the maturity of the notes approaches.

The 2.625% notes were trading just shy of par during Monday’s session, a market source said. The yield on the notes was also just under 3%.

With the conversion premium on the notes enormous, the activity surrounding the notes amounted to yield plays, according to a market source said.

Empire State stock closed Monday at $14.93, a decrease of 0.47%.

The conversion price on the notes is $19.45 with their maturity about one month away.

Teva downgraded

Teva’s 0.25% convertible notes due 2026 also saw a fresh round of trading activity on Monday.

The notes were largely moving sideways as stock sold off following an analyst downgrade.

The 0.25% notes were changing hands between 92.25 and 92.5 during Monday’s session, sources said.

Teva stock traded as low as $8.30 but closed the day at $8.56, a decrease of 7.46%.

Morgan Stanley analysts downgraded Teva stock to “underweight” from “equal weight” and reduced their price target to $6.00 from $16.00.

The downgrade was due to concerns about the increased risk of additional litigation related to Teva’s role in the opioid epidemic.

Tesla rebounds

Tesla’s 2% convertible notes due 2024 were again on the rise on Monday with the notes reaching their highest outright level since pricing as stock gained.

The 2% notes traded up to 104.5 early in the session and changed hands at 104.875 in the late afternoon, sources said.

Stock traded to a low of $244.86 and a high of $254.42 before closing the day at $253.5, an increase of 3.44%.

The notes reached their highest outright level since pricing in early May.

The new heights come just one week after the notes dropped below par and gave back much of their gains from the rally seen after releasing better-than-expected second-quarter sales numbers in early July.

While the notes dropped below par in the early part of last week, they rose to close the week around 103, a source said.

Mentioned in this article:

Empire State Realty Trust NYSE: ESRT

Illumina Inc. Nasdaq: ILMN

Repligen Corp. Nasdaq: RGEN

Tesla Inc. Nasdaq: TSLA

Teva Pharmaceutical Finance Co. LLC NYSE: TEVA

Western Digital Corp. Nasdaq: WDC

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