InterDigital, MFA Financial hit market; Enphase notes on tap; Palo Alto Networks expands

By Abigail W. Adams

Portland, Me., May 30 – Despite the volatility in the markets, the convertibles primary market returned to action with two new deals pricing prior to the market open on Thursday and one more slated to price after the market close.

InterDigital Inc. priced $350 million of five-year convertible notes and MFA Financial Inc. priced $200 million of five-year convertible notes prior to the market open on Thursday.

InterDigital’s new notes expanded on their market debut while MFA Financial’s notes were seen hovering around their issue price.

Enphase Energy Inc. plans to price $120 million of five-year convertible notes after the market close Thursday.

Proceeds will be used to repurchase the company’s deep-in-the-money 4% convertible notes due 2023.

Outside of the new paper, Palo Alto Networks Inc.’s 0.75% convertible notes due 2023 were expanding as they dropped outright following the cybersecurity company’s earnings report.

Nio Inc.’s 4.5% convertible notes due 2024 continued their downward spiral on Thursday with the yield to put on the notes now about 25%.

InterDigital expands

InterDigital priced $350 million of five-year convertible notes at par with a coupon of 2% and an initial conversion premium of 30% prior to the market open on Thursday.

Pricing came at the midpoint of talk 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.

The notes were performing well in the secondary space. They traded up to 102 as stock surged early in the session and continued to trade around 102 as the session progressed.

The notes were expanded 0.5 point to 0.75 point dollar-neutral, a market source said.

The notes dominated activity in the secondary space with more than $76 million on the tape by the mid-afternoon.

Proceeds from the new offering will be used to repurchase a portion of InterDigital’s outstanding 1.5% convertible notes due 2020 in privately negotiated transactions.

The mobile technology research and development company appeared to be buying the 1.5% notes back for 104.868, a source said.

The 1.5% notes were up about 1.5 points outright and expanded about 0.75 point from their previous levels, a source said.

Some sellers were also offloading the 1.5% notes to make room for the new paper, a source said.

InterDigital stock closed Thursday at $65.88, an increase of 5.36%.

MFA Financial’s discount

MFA Financial priced $200 million of five-year convertible notes prior to the market open on Thursday with a coupon of 6.25%, a discounted reoffer price of 99 and an initial conversion premium of 10%, according to an FWP filing with the Securities and Exchange Commission.

Pricing came at the cheap end of talk for a discount of 99, a coupon of 6% to 6.25% and an initial conversion premium of 10%, according to a market source.

The new notes were hovering around their issue price during Thursday’s session.

They were changing hands between 99.125 and 99.375 early in the session and traded up to 99.5 to 99.75 in the late afternoon, sources said.

MFA Financial stock closed Thursday at $7.09, a decrease of 1.94%.

Enphase on tap

Enphase Energy plans to price $120 million of five-year convertible notes after the market close on Thursday.

Price talk is for a fixed coupon of 1% and an initial conversion premium of 25% to 30%, according to a market source.

The pricing seemed tight for a company in the solar sector, a market source said. The borrow on the stock has also always been tough, another source said.

However, Enphase Energy’s previously priced deal was enormously successful.

Proceeds from the new offering will be used to repurchase the company’s 4% convertible notes due 2023 in privately negotiated transactions with one or more holders.

The deep-in-the-money convertible notes have $60 million outstanding. They were last seen changing hands around 297, a market source said.

Enphase Energy stock has skyrocketed since the 4% convertible notes priced in August 2018. Stock was $5.05 when the 4% notes priced.

Enphase stock closed Thursday at $15.77, a decrease of 3.19%.

Stock hit a 52-week high on May 29, closing the day at $16.29.

Palo Alto expands

Palo Alto’s 0.75% convertible notes due 2023 were down outright but saw a large dollar-neutral expansion following the company’s third-quarter earnings report.

The 0.75% notes were down about 2.625 points outright to trade just shy of 104 in the late afternoon.

They were expanded about 1 point dollar-neutral, a market source said.

Stock closed Thursday at $204.30, a decrease of 5.12%.

Palo Alto was trading down on Thursday despite a third-quarter earnings beat.

The network security company reported earnings per share of $1.31 versus analyst expectations for earnings per share of $1.25.

Revenue was $726.6 versus analyst expectations for revenue of $703.80.

Stock dropped following a spate of recent acquisitions, which lowered the company’s future guidance.

Palo Alto announced it was acquiring container security company Twistlock and serverless security company PureSec on Wednesday.

The acquisitions are expected to put a dent in the company’s fourth-quarter earnings.

Nio down again

Nio’s 4.5% convertible notes due 2024 sank further into distressed territory on Thursday.

The notes traded down about 4.25 points outright to close the day at 62.375, according to a market source.

The yield to put on the notes is now about 25%, another source said.

The Shanghai-based electric car manufacturer’s ADSs closed Thursday at $3.24, a decrease of 10.25%.

While the company’s ADSs initially saw a bump following its first-quarter earnings report, it has given back most of its gains as investors digested the company’s reported reduction in vehicle sales.

Mentioned in this article:

Enphase Energy Inc. Nasdaq: ENPH

InterDigital Inc. Nasdaq: IDCC

MFA Financial Inc. NYSE: MFA

Nio Inc. NYSE: NIO

Palo Alto Networks Inc. NYSE: PANW

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