Morning Commentary: Avaya convertible adds on swap as stock spikes; Ovid shares plunge

By Rebecca Melvin

New York, Oct. 4 – Avaya Holdings Corp.’s 2.25% convertibles due 2023 traded up on an outright basis, and was flat to higher on swap on Friday as shares of the Santa Clara, Calif.-based digital communications software company surged on news of a new strategic partnership with RingCentral Inc.

The Avaya convertibles changed hands at 88 and 89 with the underlying shares at around $12.50. On a swap basis, the bonds at 89 versus a stock price of $12.50 were called 1 point better if holders were on a 50% delta, according to a New York-based market source.

The bonds, of which $300 million priced in June 2018, had been around the mid 80 mark prior to news of the partnership, which is expected to expand Avaya’s portfolio of offerings using RingCentral as an exclusive provider of unified communications as a service. RingCentral is also contributing $500 million to Avaya, which has authorized a repurchase program of up to $500 million of common stock. Avaya also plans to pay down $250 million of debt under its term loan B.

Avaya shares surged 25% and topped the list of advancing U.S. stocks and was among the most actively traded early Friday.

Moving in the opposite direction, Ovid Therapeutics Inc.’s common shares tanked after the New York-based biopharmaceutical company announced that it has priced another $10 million of its series A convertible preferred stock and $22.5 million of common stock.

Ovid’s common shares were last seen down 87 cents, or 26.6%, at $2.40.

The 4,000 preferred shares that priced at $2,500 per share are convertible into 1,000 shares of common stock. The proceeds of both offerings are earmarked to advance Ovid’s clinical development programs for several rare neurological disorders. The remaining prices will be for working capital and general corporate purposes.

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