Avinger, Avadel price new deals; convertibles trading thin; Western Digital dominates

By Abigail W. Adams

Portland, Me., Feb. 14 – After nearly one and half weeks with no new convertible deals, Wednesday began with the pricing of two.

In a tightly allocated overnight deal, Avadel Pharmaceuticals plc priced $125 million of five-year convertible notes before the market open Wednesday at par with a coupon of 4.5% and an initial conversion premium of 20%.

There has been little trading activity of the new paper and not much is expected due to the tight allocation, a market source said. “The deal was done when it was announced,” the source said.

In a small preferred stock offering, Avinger Inc. priced $18 million, or 18,000 shares, of series B convertible preferred stock and series 1 and series 2 warrants prior to the market open.

The preferred stock has a conversion price of $2.00 and a conversion ratio of 500. The series 1 and series 2 warrants have a strike price of $2.00 and are each exercisable for 500 shares of common stock.

Ladenburg Thalmann & Co. Inc. is the bookrunner for the offering from the Redwood City, Calif.-based commercial-stage medical device company.

Trading volume remained light in the convertibles space on Wednesday as the volatility in the broader markets continues with recent inflation data fueling concern over the Federal Reserve accelerating interest rate increases.

While volume was light, Western Digital Corp.’s 1.5% convertible notes due 2024 continued to dominate trading on Wednesday, although with little change to the notes, which were wrapped around 101.5.

Citrix Systems’ 0.5% convertible notes due 2019 were also active on Wednesday and gained about 3 points on an outright basis as its underlying equity increased. Citrix’s 0.5% notes have been active since Monday when Citrix announced it acquired the Portland, Ore.-based start-up Cedexis.

Avadel’s deal

The allocation was tight for Avadel’s offering of $125 million of five-year convertible notes, which saw little to no trading action in the secondary market, according to market sources.

Pricing of the notes came in line with talk for a fixed coupon of 4.5% and at the cheap end of talk for an initial conversion premium of 20% to 25%.

The notes were sold through subsidiary Avadel Finance Cayman Ltd.

The terms of the deal were “optically very attractive,” a market source said.

The Dublin, Ireland-based specialty pharmaceutical company’s American Depositary Shares took a beating on Wednesday, closing the day at $7.69, a decrease of 14.46%.

The stock’s decline was no surprise and was part of the reason the deal terms were so good, a market source said.

“It looks like they priced it appropriately. The stock was going to get hit. There are a lot of shares for sale,” the source said.

Concurrently with the offering, Avadel will repurchase $18 million of the company’s ADS at a purchase price of $8.99, the closing price on Feb. 13, according to a company news release.

The share buyback “was an unbelievable deal,” a market source said.

Long-only accounts were among the initial purchasers of the notes, a source said.

Avadel expects the full-scale commercial launch of Noctiva in the second quarter of 2018, which is the only FDA-approved treatment for nocturia, the overproduction of urine at night.

The company is also in phase 3 clinical trials for a treatment for excessive daytime sleepiness and cataplexy, the sudden loss of muscle tone brought on by strong emotions, which affects narcolepsy patients.

Volatile markets

Equity markets weathered the storm from confirmation about rising inflation relatively well on Wednesday, with the Dow Jones industrial average and the S&P 500 index both up at the market close.

However, the bond market “took it on the chin,” a market source said, with a sell-off in 10-year Treasuries sending yields to their highest point in four years.

For convertibles, the impact of the upheaval of the markets has been limited. “Trading volume has been light through the volatility,” a market source said. “Guys aren’t doing much in terms of trading.”

For the convertible notes that have traded, most were trading in line or up slightly dollar neutral, a market source said.

Wednesday’s focus

While trading volume was light in the convertible space on Wednesday, Western Digital’s 1.5% convertible notes due 2024 continued to dominate trading activity although with little change to trading price.

The 1.5% notes were wrapped around 101.5 for most of Wednesday’s session. Western Digital stock closed Wednesday at $83.33, an increase of 0.43%.

Western Digital’s 1.5% notes and Citrix’s 0.5% notes were among the most actively traded on Wednesday, a market source said.

However, Western Digital’s 1.5% notes saw nearly triple the amount of trading volume by dollar amount than Citrix’s 0.5% notes.

Citrix’s 0.5% notes climbed about 3 points alongside its equity to close the day around 129.5. Citrix stock was up, closing Wednesday’s session at $89.44, an increase of 2.96%.

Citrix’s 0.5% convertible notes have been active since Monday when the Fort Lauderdale, Fla.-based software company announced it acquired cloud-computing start-up Cedexis.

The acquisition will help Citrix optimize its app and content performance through use of Cedexis technology, which routes internet traffic across content delivery networks and data centers globally.

Cedexis has 77 employees and offices in Portland, Ore., and Paris. Citrix plans to keep both offices open, the South Florida Business Journal reported.

Mentioned in this article:

Avadel Pharmaceuticals plc Nasdaq: AVDL

Avinger Inc. Nasdaq: AVGR

Citrix Systems Inc. Nasdaq: CTXS

Western Digital Corp. Nasdaq: WDC

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