Morning Commentary: Lumentum convertible notes eyed; Innoviva volatile on debut

By Abigail W. Adams

Portland, Me., March 3 – New paper was in focus on Thursday as the convertibles primary market prepped a new offering and the first new deal of the week debuted in the secondary space.

Lumentum Holdings Inc. plans to price $750 million of convertible notes due June 15, 2028 after the market close on Thursday.

The deal looked cheap based on underwriters’ assumptions.

Meanwhile, new paper from Innoviva Inc. made its aftermarket debut as equities gave back their gains from Wednesday’s rally.

The new paper was volatile on debut and whipsawed between large outright gains and losses.

Lumentum on tap

Lumentum plans to price $750 million of convertible notes due June 15, 2028 with price talk for a coupon of 0.375% to 0.875% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 275 basis points over Libor and a 35% vol., according to a market source.

Using those assumptions, the deal looked 1.5 points cheap at the midpoint of talk, sources said.

The offering was coming as a “happy meal” with the company using proceeds to repurchase $250 million of its common stock in privately negotiated transactions.

Innoviva active

Innoviva priced an upsized $225 million of six-year convertible notes after the market close on Wednesday at par at the rich end of talk with a coupon of 2.125% and an initial conversion premium of 35%.

Price talk was for a coupon of 2.125% to 2.625% and an initial conversion premium of 30% to 35%.

The greenshoe was also upsized to $45 million.

The initial size of the offering was $200 million with a greenshoe of $40 million.

The new paper was volatile on debut and traded to a high of 102.25 and a low of 97.75, according to a market source.

The new paper was changing hands between 98.5 and 99.5 about one hour into the session, a source said.

Innoviva’s stock was down to $18.24, a decrease of 6%, shortly before 11 a.m. ET.

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