Intercept Pharmaceuticals offering eyed; Infinera tanks on earnings; Avaya contracts

By Abigail W. Adams

Portland, Me., May 9 – Despite the continued choppiness in the markets on renewed trade tensions between the United States and China, the primary market continued to roll out new convertible deals.

RumbleOn, Inc. plans to price $30 million of five-year convertible notes in a Rule 144A offering, according to a company news release. Further details were not available by press time.

Intercept Pharmaceuticals Inc. plans to price $200 million of seven-year convertible notes after the market close on Thursday. The deal looked cheap based on underwriters’ assumptions, sources said.

Meanwhile, trading volume in the secondary space was relatively quiet on Thursday with about $350 million in reported volume by the late afternoon.

Infinera Corp.’s 2.125% convertible notes due 2024 were the ‘disaster du jour’ with the notes dropping on an outright and dollar-neutral basis after reporting mixed earnings.

Avaya Holdings Corp.’s 2.25% convertible notes due 2023 were also contracting after a disappointing earnings report.

Intercept looks cheap

Intercept Pharmaceuticals plans to price $200 million of seven-year convertible notes after the market close on Thursday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be in the market with a credit spread of 500 basis points over Libor and a 45% vol., according to a market source.

Sources pegged the deal about 1.5 points cheap at the midpoint of talk.

The deal looked good, sources said. However, the four-year provisional call with no make-whole was pointed to as a drawback to the offering.

The notes are pricing concurrently with a $200 million offering of common stock, which also carries a greenshoe of $30 million.

Sources expected the notes to price on the cheap end of talk given the continued choppiness of the market.

While Intercept’s new offering was eyed, the biotech company’s outstanding 3.25% convertible notes due 2023 were slow to trade on Thursday with the bonds last seen changing hands around 93.5.

Infinera tanks

Infinera’s 2.125% convertible notes due 2024 were tanking in active trading on Thursday after a mixed earnings report.

The 2.125% convertible notes dropped more than 10 points outright and were contracted several points dollar-neutral based on the hedge used, sources said.

The notes were changing hands around 69 after previously trading at 80.

One source pegged the notes down 1.5 points dollar-neutral on a 60% delta.

Infinera stock traded as low as $3.11 and closed the day at $3.24, a decrease of 26.7%.

The manufacturer of optical transmission equipment’s stock has been slashed in the past year, losing almost two-thirds of its value since pricing its convertible notes offering in September 2018.

The company was continuing to take a hit after a first-quarter earnings report that beat on the bottom line but missed on the top.

Infinera reported losses per share of 23 cents versus analyst expectations for losses per share of 27 cents.

However, the company reported revenue of $292.7 million versus analyst expectations for revenue of $311.3 million.

Guidance for the current quarter also disappointed with projected revenue of $288 million to $308 million versus analyst expectations for revenue of $336.56 million.

The fundamentals of the company were eroding, a source said.

Avaya contracts

Avaya Holdings’ 2.25% convertible notes were also trading down in high-volume activity after a disappointing second-quarter earnings report.

The 2.25% convertible notes dropped more than 4 points outright. They were changing hands at 93.75. The notes were contracted 1.5 points dollar-neutral.

Avaya stock closed Thursday at $15.37, a decrease of 16.29%.

Avaya reported losses per share of 12 cents versus analyst expectations for earnings per share of 75 cents. Revenue was $709 million versus analyst expectations for revenue of $748.81 million.

Avaya also missed on guidance. The digital communications holding company set guidance for 2019 at $2.925 billion to $2.975 billion versus analyst expectations for earnings of $3.07 billion.

The company announced it was exploring strategic alternatives.

Avaya has long been rumored to be the subject of a takeover. However, the take-out bid has yet to materialize, a market source said.

Mentioned in this article:

Avaya Holdings Corp. NYSE: AVYA

Infinera Corp. Nasdaq: INFN

Intercept Pharmaceuticals Inc. Nasdaq: ICPT

RumbleOn Inc. Nasdaq: RMBL

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