Morning Commentary: Integra convertible notes offering eyed; Tesla’s rise continues

By Abigail W. Adams

Portland, Me., Feb. 4 – With markets stabilizing from last week’s coronavirus induced volatility, a pick-up in primary market activity is expected with one new deal already on deck.

Market players were eyeing Integra LifeSciences Holdings Corp.’s $500 million offering of long five-year convertible notes, which is set to price after the market close.

Price talk is for a coupon of 0.375% to 0.875% and an initial conversion premium of 27.5% to 32.5%.

The deal is being marketed with assumptions of 250 basis points over Libor and a 28% vol., according to a market source.

Using those assumptions, the deal modeled a little over 0.25 point cheap at the midpoint of talk, a source said.

The medical device technology company has a senior revolving credit facility that priced at 150 bps over Libor, cash on the balance sheet and positive earnings.

Given that, the credit spread “doesn’t seem unreasonable,” the source said.

Meanwhile, Tesla Inc.’s convertible notes continued to dominate activity in the secondary space as stock shot up more than 15% on Tuesday.

After topping double par in the past week, all three tranches were heading toward triple par early Tuesday.

The 2% convertible notes due 2024 traded as high as 307 but came in alongside stock and were changing hands around 298 shortly before 11 a.m. ET.

The 2.735% convertible notes due 2022 traded up to 279.

The 1.25% convertible notes due 2021 traded up to 256.

Tesla stock traded as high as $940.13 soon after the opening bell but was changing hands at $881.28, an increase of 12.98%, shortly before 10:45 a.m. ET.

With no fundamental reason for the dramatic rise, the new level was most likely the result of a short-squeeze, sources said.

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