Morning Commentary: Ionis convertible offering eyed; Wayfair notes in focus early

By Abigail W. Adams

Portland, Me., June 7 – The convertibles primary market returned to action after an almost two-week hiatus with one new deal set to price after the market close.

Ionis Pharmaceuticals Inc. plans to price $500 million of five-year convertible notes after the market close on Wednesday.

The latest refinancing deal to come to market looked cheap based on underwriters’ assumptions and is expected to play to heavy demand with a captive audience in the buyback of its outstanding notes and the market hungry for new paper.

After a burst of issuance in early May, the primary market has been largely dormant for the past two weeks with the exception of Tilray Brands, Inc.’s $150 million issue of 5.2% convertible notes due 2027, which saw almost no secondary trading activity.

The market has been expecting a deluge of new paper in refinancings and from the biotech sector in 2023.

There is still a backlog of deals in the pipeline, a source said.

Issuers have been waiting for a resolution to the debt-ceiling debacle and awaiting to see the impact on Treasuries from a rush of pent-up issuance.

With the debt-limit deal passed and Treasuries largely stable, issuers may be ready to unleash their deals, a source said.

Meanwhile, trading activity in the secondary space remained muted on a mixed morning for equities with the exception of certain names.

The Dow Jones industrial average was up 49 points, or 0.15%, the S&P 500 index was down 0.13%, the Nasdaq Composite index was down 0.52% and the Russell 2000 index was up 1.11% shortly before 11 a.m. ET.

There was $88 million on the tape about one hour into the session with Wayfair Inc.’s convertible notes in focus as stock continued its bull run early in the session.

Ionis eyed

Ionis plans to price $500 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 325 basis points over SOFR and a 35% vol.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of talk.

But like most refinancing deals, the real value will come in the buyback of its outstanding notes.

Ionis plans to use proceeds to repurchase for cash a portion of the company’s 0.125% convertible notes due 2024 in privately negotiated transactions.

The 0.125% notes were trading on a 94-handle heading into Wednesday’s session.

Wayfair’s run

Wayfair’s convertible notes continued to add in active trade as stock continued its bull run early in Wednesday’s session.

The serial convertible note issuer’s 3.25% convertible notes due 2027 were the most active in the debt stack early Wednesday.

The notes added 3 points outright to trade up to 104.5, a source said.

There was $13 million in reported volume.

The high-premium 1% convertible notes due 2026 added 2 points outright to trade at 76.375 early in the session.

There was $7 million in reported volume.

The most recently priced 3.5% convertible notes due 2028 continued to set new outright heights with the notes adding 4 points to trade up to 131 early in the session.

There was $4 million in reported volume.

Wayfair’s stock was volatile on Wednesday after an almost 25% gain over the past week.

Stock added as much as 7% at the open but turned negative as the session progressed and was trading at $49.21, a decrease of 0.51%, shortly before 11 a.m. ET.

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