Teekay eyes deal; Insmed seen as cheap; new paper active; Priceline gains on new CFO

By Abigail W. Adams

Portland, Me., Jan. 23 – There was an uptick of activity in the convertibles space on Tuesday with the primary market preparing a $100 million offering from Teekay Corp. and a $300 million offering from Insmed Inc.

Teekay plans to price $100 million of five-year convertible notes before the market open on Wednesday with price talk for a coupon of 4.75% to 5.25% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

JPMorgan and Morgan Stanley are the bookrunners for the Rule 144A deal, which carries a greenshoe of $15 million.

Teekay is offering the convertible notes concurrently to a $100 million, or 10 million share, common stock offering.

The price talk is very attractive, but it is no doubt a high-risk situation, a market source said.

Insmed plans to price $300 million of seven-year convertible notes after the market close with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%.

The deal initially looked to be a few points cheap, a market source said.

While the primary market prepares new paper, recently priced deals were active during Tuesday’s session, which saw about $412 million in trading volume by late afternoon, according to a market source.

While the deals have had different receptions in the secondary market, the new paper entering the space is a positive for the convertibles universe, a market source said.

“It does seem like there are some good signs for convertibles,” the source said.

Exact Sciences Corp.’s 1% convertible notes due 2025 broke par after slumping on Monday to levels reached during last week’s sell-off.

Nutanix, Inc.’s 0% convertible notes due 2023 gained about 2 points on an outright basis during Tuesday’s session and Patrick Industries, Inc.’s 1% convertible notes due 2023 gained about 1 point.

Priceline Group Inc.’s trio of convertible notes also attracted attention during Tuesday’s session. The notes have been a focus of secondary market activity since the company appointed a new CFO on Monday.

Insmed seen as cheap

The market awaits Insmed’s $300 million offering of seven-year convertible notes, which were expected to price after the market close on Tuesday.

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.

Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and Leerink Partners are joint bookrunners for the registered deal, which carries a $45 million greenshoe.

With a credit spread of 550 basis points over Libor and a 42% volatility, the deal looked to be a few points cheap, a market source said. “Initially, it looks pretty good,” the source said.

Insmed stock was hammered in high-volume trading on Tuesday as the bookbuilding process was underway. Insmed stock ended Tuesday’s session at $29.005, a decrease of 6.01%.

Recent deals

New paper from Patrick Industries, Nutanix and Exact Sciences actively traded hands during Tuesday’s session. The greenshoes for all three deals, which priced over the past two weeks, were fully exercised.

The three deals have brought a combined $1.437 billion into the convertible space.

After taking a beating, Exact Sciences’ 1% convertible notes ended Tuesday’s session above par. After showing signs of a rebound, the notes slumped back into the 97 range on Monday.

The notes steadily traded up throughout Tuesday’s session, ending the day above par at 100.129, according to Trace data. Exact Sciences’ stock soared on Tuesday, ending the day at $52.15, an increase of 7.55%.

Exact Sciences’ convertible notes and stock nosedived last Wednesday after a Taiwan-based competitor released a positive clinical result for a rival colorectal cancer screening product.

Nutanix’s 0% convertible notes due 2023 were actively traded on Tuesday, making a 2-point gain on an outright basis, according to a market source. The notes were trading at 104.732 versus an equity price of $37.21 mid-afternoon.

Nutanix stock ended the day at $37.49, an increase of 4.4%.

Patrick Industries 1% notes due 2023 gained about a point on an outright basis to trade up to 104.410 versus an equity price of $71.25 mid-afternoon.

Priceline active

Priceline’s 1% convertible notes due March 2018, 0.9% convertible notes due 2021 and 0.35% convertible notes due 2020 have been active since Monday when the company announced the hiring of David Goulden as the next chief financial officer.

Priceline’s 0.35% notes saw heavy-volume trading during Tuesday’s session and jumped about 3 points on an outright basis. The notes were trading at 152 versus an equity price of $1,947.54.

Priceline’s 0.9% notes traded to a high of 123.1 before ending the session at a low of 120, according to Trace data. The notes have been in the 119 to 120 range for much of January.

Priceline’s 1% notes, which will mature in three months, jumped 4 points to close the session at 206.32. The notes were in the 200 to 201 range last week.

Priceline stock ended Tuesday at $1,962.94, an increase of 2.46%.

Goulden will take the reigns as executive vice president and CFO on March 1 and will oversee the Norwalk, Conn.-based online travel service’s global financial operations.

Goulden is replacing retiring CFO Daniel Finnegan.

Mentioned in this article:

Exact Sciences Corp. Nasdaq: EXAS

Insmed, Inc. Nasdaq: INMS

Nutanix, Inc. Nasdaq: NTNX

Patrick Industries, Inc. Nasdaq: PATK

Priceline Group Inc. Nasdaq: PCLN

Teekay Corp. NYSE: TK

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