Morning Commentary: TPI Composites, Encore convertibles expand on debut; Novavax plunges

By Abigail W. Adams

Portland, Me., March 1 – It was another active start to the day in the convertibles secondary market as $315 million in new supply entered the space.

TPI Composites Inc. priced an upsized $115 million of five-year convertible notes and Encore Capital Group Inc. sold an upsized $200 million of six-year convertible notes after the market close on Tuesday.

The new notes were putting in a solid performance on their aftermarket debut with both deals trading up on an outright and dollar-neutral basis.

The new paper hit the secondary space as equities remained volatile amid continued rate concerns.

Equity indexes wavered between gains and losses early in the session and were mixed shortly before 11 a.m. ET.

The Dow Jones industrial average was up 26 points, or 0.07%, the S&P 500 index was down 0.26%, the Nasdaq Composite index was down 0.38% and the Russell 2000 index was up 0.23% shortly before 11 a.m. ET.

While new paper continued to dominate the tape, topical news drove the largest price movements with Novavax Inc.’s 5% convertible notes due 2027 the disaster du jour.

The 5% notes cratered double digits on an outright and dollar-neutral basis after the company announced substantial doubt about its ability to continue operations through the year.

TPI Composites expands

TPI Composites priced an upsized $115 million of five-year convertible notes after the market close on Tuesday at par at the midpoint of talk with a coupon of 5.25% and an initial conversion premium of 30%.

Price talk was for a coupon of 5% to 5.5% and an initial conversion premium of 27.5% to 32.5%.

The greenshoe was also upsized to $17.5 million.

The initial size of the offering was $100 million with a greenshoe of $15 million.

The new paper was putting in a solid performance on an outright and dollar-neutral basis.

The notes were changing hands at 100.625 versus a stock price of $11.32 early in the session.

There was $11 million in reported volume.

TPI’s stock was trading at $11.41, a decrease of 1.3%, shortly before 11 a.m. ET.

Encore rises

Encore Capital priced an upsized $200 million of six-year convertible notes after the market close on Tuesday at par at the midpoint of talk with a coupon of 4% and an initial conversion premium of 27.5%.

Price talk was for a coupon of 3.75% to 4.25% and an initial conversion premium of 25% to 30%.

The greenshoe was also upsized to $30 million.

The initial size of the offering was $175 million with a greenshoe of $26.25 million.

While volume was light early in the session, the notes were making gains on an outright and dollar-neutral basis.

The notes were changing hands at 101.5 versus a stock price of $52.20 early in the session, according to a market source.

Encore’s stock was trading at $52.39, an increase of 1.37%, shortly before 11 a.m. ET.

Novavax plummets

Novavax’s 5% convertible notes due 2027 plummeted on an outright and dollar-neutral basis after the company announced substantial doubt about its ability to continue operations through 2023.

The 5% notes dropped 20 points outright and contracted 11 points dollar-neutral on the news, a source said.

The 5% notes were changing hands just shy of 66 versus a stock price of $6.80 early in the session.

There was $6 million in reported volume.

Novavax’s stock was trading at $6.89, a decrease of 25.60%, shortly before 11 a.m. ET.

The vaccine maker and pandemic darling announced alongside earnings post-close Monday that there was substantial doubt about its ability to continue as a going concern.

“And so soon after raising capital,” a source said.

Novavax priced a $175.25 million issue of the 5% notes in late December.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.