Morning Commentary: Okta convertibles eyed; Aptiv on deck; Jazz flat; Glaukos volatile

By Abigail W. Adams

Portland, Me., June 9 – While the convertibles primary market was quiet early Tuesday with no new deal announcements, the primary market is roaring into the final weeks of the second quarter.

The June 8 week is already poised to be another multi-billion-dollar week for new issuance with $1.1 billion pricing over two deals after the market close on Monday and $2 billion set to price in two deals after the market close on Tuesday.

Okta Inc. plans to price $1 billion of six-year convertible notes and Aptiv plc plans to price $1 billion, or 10 million shares, of three-year par-of-$100 series A mandatory convertible preferred stock after the market close on Tuesday.

While Okta’s offering modeled cheap based on underwriters’ assumptions, it followed the trend of recent tech deals that have been pricing increasingly tighter.

As market players eyed the deals in the pipeline, new paper from Jazz Pharmaceuticals plc and Glaukos Corp. made their aftermarket debut.

The new paper hit the secondary space as equities gave back some of their gains from Monday’s session.

Both were trading around par with stock off early in the session.

Okta eyed

Okta plans to price $1 billion of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.125% to 0.625 and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be marketed with assumptions of 400 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, sources pegged the deal between 1.75 points and 1.875 points cheap at the midpoint of talk.

While the offering still looked cheap, the San Francisco-based enterprise identity provider was following a growing trend of software deals that have seen increasingly tighter pricing in recent weeks.

The serial issuer of convertible notes also hopped onto the bandwagon of companies taking advantage of current market conditions to repurchase or exchange a portion of its outstanding convertible notes.

Okta intends to enter into privately negotiated transactions with certain holders of its existing 0.25% convertible senior notes due 2023 to exchange a portion of the 2023 notes for cash and shares.

Aptiv on deck

Aptiv plans to price $1 billion, or 10 million shares, of three-year par-of-$100 series A mandatory convertible preferred stock after the market close on Tuesday with price talk for a dividend of 5.25% to 5.75% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The company is also planning a concurrent $1 billion offering of ordinary shares.

Jazz Pharmaceuticals at par

Jazz Pharmaceuticals priced $850 million six-year exchangeable notes after the market close on Monday at the cheap end of talk with a coupon of 2% and an initial exchange premium of 40%.

Price talk was for a coupon of 1.5% to 2% and an initial exchange premium of 40% to 45%, according to a market source.

The notes were issued by subsidiary Jazz Investments I Ltd. and are exchangeable into the common shares of Jazz Pharmaceuticals.

The new 2% notes were in focus in the secondary space. However, they were largely trading flat, a source said.

The 2% notes were changing hands between 98.5 and 99.5 with stock down 1% to 3% early Tuesday, a source said.

They popped above par and were changing hands between 100.125 and 100.25 as stock improved.

The notes were moving largely in line on a dollar-neutral, or hedged, basis.

Jazz stock traded as low as $108.09 early Tuesday but was gaining strength as the session progressed. Stock was $111.94, an increase of 0.59%, shortly before 11 a.m. ET.

In connection with the new offering, Jazz repurchased $332.9 million of the principal amount of the company’s 1.875% exchangeable notes due 2021 for $332.9 million in cash.

Glaukos volatile

Glaukos priced an upsized $250 million of seven-year convertible notes after the market close on Monday at par at the midpoint of talk with a coupon of 2.75% and an initial conversion premium of 30%.

Price talk was for a coupon of 2.5% to 3% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The 2.75% notes were volatile early in the session.

They traded as low as 97.75 but quickly popped back up above par. “It was probably just some flippers getting out,” a market source said.

The notes were changing hands around 100.25 with stock down about 3%.

Glaukos stock was $41.68, a decrease of 3.45%, shortly before 11 a.m. ET.

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