Primary sees deal flow of $3.15 billion; Becton prices; Dermira rises; Black & Decker on tap

By Stephanie N. Rotondo

Seattle, May 11 – The convertible bond primary market was showing no signs of letting up on Thursday.

For the week thus far, $3.15 billion of new convertible issues have priced. That includes a $250 million sale of 3% five-year convertible notes from Dermira Inc. that priced late Wednesday and Becton, Dickinson & Co.’s $2.25 billion issue of 6.125% series A mandatory convertible preferred stock.

The Becton deal came Thursday morning with an initial conversion premium of 20%. The terms were in the middle of the 6% to 6.5% yield talk, as well as the 17.5% to 22.5% premium talk.

One trader said the Becton deal “did very well.”

He placed the convertible preferreds in a $51.85 to $52 context, versus a stock price of $183.70.

“On a $50-par [issue], that is a nice initial move,” he said, adding that the paper was up half a point on swap.

“Both outrights and hedged investors are very happy,” he said.

Citigroup Global Markets Inc., J.P Morgan Securities LLC, Morgan Stanley & Co. LLC, MUFG, BNP Paribas Securities Corp., Barclays and Wells Fargo Securities LLC ran the books.

As for Dermira, it came with an initial conversion premium of 30%.

Come Thursday trading, the convertibles were quite actively traded, rising to more than 103.25, according to a market source.

The company’s stock, however, did not fare so well, slipping 86 cents, or 3.15%, to $26.41.

The Rule 144A deal priced in the middle of talk for a 2.75% to 3.25% yield and at the rich end of talk for an initial conversion premium of 25% to 30%.

Leerink Partners and Cowen & Co. are the joint bookrunners.

DexCom Inc.’s $350 million of 0.75% convertible notes due 2022 – a deal priced Monday – were also on the busy side.

However, the paper was seen falling a point to straddle 99. The underlying equity was also lower, falling $2.16, or 3.04%, to $68.94.

The deal was upsized from $300 million and, at a 0.75% yield and an initial conversion premium of 35%, came at the rich end of price talk.

JPMorgan and BofA Merrill Lynch were the bookrunners.

From the previous week’s business, HubSpot Inc.’s $400 million of 0.25% convertible notes due 2022 were a touch softer on the day, trading near 98.75.

The stock was also weaker, trading off 80 cents, or 1.15%, to $69.05.

HubSpot initially price $350 million of the convertibles with an initial conversion premium of 35% on May 4. On Wednesday, the company said its $50 million greenshoe had been exercised in full, lifting the total amount outstanding to $400 million.

But the pipeline wasn’t done flowing just yet, as Stanley Black & Decker Inc. said it was selling $650 million of equity units.

The equity units will hold a three-year forward stock purchase contract, as well as a share of 0% series C convertible perpetual preferred stock.

Price talk on the $100-par units is 5.5% to 6% with an initial conversion premium of 15% to 20%.

Pricing was expected after Thursday’s close, but details were not available as of 6:30 p.m. ET.

Citigroup, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and Wells Fargo are running the books.

Ahead of pricing, Stanley’s stock was off 98 cents at $138.10.

Mentioned in this article:

Becton, Dickinson & Co. NYSE: BDX

Dermira Inc. Nasdaq: DERM

DexCom Inc. Nasdaq: DXCM

HubSpot Inc. NYSE: HUBS

Stanley Black & Decker Inc. NYSE: SWK

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