MFA Financial, Enphase on tap; InterDigital convertibles eyed; Tesla, Evolent active

By Abigail W. Adams

Portland, Me., May 29 – Despite another brutal session for equities on Wednesday, the primary market returned to action with three new deals on deck.

Enphase Energy Inc. plans to price $120 million of five-year convertible notes, according to a company news release.

Credit Suisse Securities (USA) LLC is the bookrunner for the Rule 144A offering, which carries a greenshoe of $12 million.

Proceeds will be used to repurchase a portion of the company’s 4% convertible notes due 2023 in privately negotiated transactions with one or more holders.

Further details were not available as of press time.

In an overnight deal, MFA Financial Inc. plans to price $200 million of five-year convertible notes after the market close on Wednesday. The deal modeled cheap based on underwriters’ assumptions.

InterDigital Inc. plans to price $350 million of five-year convertible notes after the market close on Wednesday. Sources pegged the deal cheap to fair value based on underwriters’ assumptions.

Meanwhile, trading volume in the secondary space remained relatively light.

Tesla Inc.’s convertible notes continued to see active trading with the notes coming in as stock continued to waver between gains and losses.

Workday, Inc.’s 0.25% convertible notes due 2022 were among the most actively traded issues in the secondary space with the notes dropping outright but expanding dollar-neutral as stock fell post-earnings.

Evolent Health Inc.’s 1.5% convertible notes due 2025 tanked on an outright and dollar-neutral basis as stock sold off following news the company would be making an acquisition.

MFA Financial looks cheap

In a deal set to price shortly after it was announced, MFA Financial plans to price $200 million of five-year convertible notes after the market close on Wednesday.

Price talk is for a discounted reoffer price of 99, a coupon of 6% to 6.25% and an initial conversion premium of 10%, according to a market source.

Underwriters were marketing the deal with a credit spread of 350 basis points over Libor and a 10% vol., according to a market source.

Using those assumptions, the deal modeled almost 1.75 points cheap, a source said.

InterDigital eyed

InterDigital plans to price $350 million of five-year convertible notes after the market close on Wednesday.

Price talk is for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal was heard to be in the market with a credit spread of 250 bps over Libor and a 26% vol., according to a market source.

Sources pegged the deal at fair value to 0.25 point cheap at the midpoint of talk using underwriters’ assumptions.

Other sources pegged the deal up to 1.25 points cheap.

Some sources felt the credit spread was conservative.

InterDigital is a solid credit with plenty of cash on hand and good earnings, a source said. The deal could easily have come with a credit spread of 200 bps to 225 bps over Libor.

While some sources were surprised to see the deal given the volatility in the markets, it was heard to be wall-crossed with holders of InterDigital’s outstanding notes selling the old ones to buy the new.

Proceeds from the new offering are to be used, in part, to repurchase the mobile technology research and development company’s 1.5% convertible notes due 2020 in privately negotiated transactions.

The deal is also coming as a “happy meal” with $50 million in proceeds to be used to repurchase stock.

The 1.5% notes have $316 million outstanding, according to Trace data.

They were last seen changing hands on Tuesday between 103.5 and 103.75.

Workday expands

Workday’s 0.25% convertible notes dominated activity in the secondary space.

The notes were down outright but making gains on a dollar-neutral basis as stock sold off despite an earnings beat.

The 0.25% notes were down about 7 points outright to change hands at 147.375 in the late afternoon.

They expanded about 0.25 point dollar-neutral on the way down, a market source said.

Workday stock traded as high as $210.00 and as low as $199.36 before closing the day at $203.23, a decrease of 4.53%.

Stock was trading down despite a first-quarter earnings beat.

Workday reported non-GAAP earnings per share of 43 cents versus analyst expectations for earnings per share of 41 cents.

Revenue was $825.1 million versus analyst expectations for revenue of $814.2 million.

Tesla comes in

Tesla’s convertible notes remained active in the secondary space with the notes coming in after showing signs of improvement over the past few sessions.

Tesla’s 2% convertible notes due 2024 were changing hands around 88.25 early in Wednesday’s session but dropped to trade around 87 by the mid-afternoon.

They contracted about 0.375 point dollar-neutral by the mid-afternoon, a market source said.

The 1.25% convertible notes due 2021 traded up to 91.875 early Wednesday but dropped down to 89.25 as the session progressed.

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

The 2.375% convertible notes due 2022 were changing hands around 90.

The notes were catching a bid early in the session on the heels of some stabilizing news for the company, a market source said.

However, Tesla stock continued to whipsaw between gains and losses throughout Wednesday’s session.

Stock traded to a low of $185.00 and a high of $192.39 before closing the day at $189.86, an increase of 0.61%.

While the speculation is wild, news stories continue to circulate about Tesla as a prospective takeover target, a market source said.

Evolent Health tanks

Evolent Health’s 1.5% convertible bonds due 2025 dropped on both an outright and dollar-neutral basis as stock tanked following news the company would be making an acquisition.

The 1.5% convertible notes dropped about 8.5 point to close the day at 74.125.

They contracted about 1.5 points dollar-neutral, a market source said.

Evolent Health’s 2% convertible notes due 2021 were down about 5 points to close the day at 94.5.

The notes move on a lighter delta than the 1.5% notes, a source said.

Evolent Health stock closed Wednesday at $9.975, a decrease of 29.51%.

Stock tanked following news Evolent Health would acquire an ownership interest in Passport Health Plan, which serves Medicaid beneficiaries in Kentucky.

In addition to news of the acquisition, Evolent Health filed a prospectus supplement on Tuesday for the resale of up to 1.6 million shares of common stock held by Momentum Health Group, LLC.

Mentioned in this article:

Enphase Energy Inc. Nasdaq: ENPH

Evolent Health Inc. NYSE: EVH

InterDigital Inc. Nasdaq: IDCC

Tesla Inc. Nasdaq: TSLA

Workday, Inc. Nasdaq: WDAY

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