By Abigail W. Adams
Portland, Me., April 16 – While the convertibles primary market was expected to be slow during the truncated holiday week, a new deal launched after the market close on Tuesday.
Aphria Inc. plans to price $300 million in five-year convertible notes in a Rule 144A and Regulation S deal, which carries a greenshoe of $45 million, according to a company news release.
Further details on the offering from the Leamington, On.-based global cannabis company were not available as of press time.
Meanwhile, market players were eyeing Aqua America Inc.’s $725 million offering of $50-par three-year tangible equity units, which is slated to price after the market close on Wednesday.
While tangible equity units had minimal appeal to some sources, others felt the deal was attractive.
While the primary market prepared new deals, the secondary space was again lethargic on Tuesday with $49 million on the tape early in Tuesday’s session and $300 million on the tape by the late afternoon.
Western Digital Corp.’s 1.5% convertible notes due 2024 were among the most actively traded in the secondary space as stock shot up following an analyst upgrade.
PDL BioPharma Inc.’s 2.75% convertible notes due 2021 were active with sellers taking money off the table prior to earnings – a theme for several names in the convertibles space that have seen stock runs in the past quarter.
Bilibili Inc.’s 1.375% convertible notes due 2026 were among the major volume movers during Tuesday’s session with the notes again below par after trading just north of par at the end of last week.
Aqua America eyed
Aqua America continues to market its $725 million offering of $50-par three-year tangible equity units and concurrent $1 billion common stock offering, which are expected to price after the market close on Wednesday.
Price talk for the units, which consist of a prepaid stock purchase contract and amortizing note, is for a dividend of 6% to 6.5% and a threshold appreciation price of 17.5% to 22.5%.
While some sources were uninterested in tangible equity units in general due to their limited downside protection, others found the deal appealing.
The deal is reasonably priced with the higher yield compensating for the limited downside protection compared to a convertible bond, a market source said.
Aqua America is also a solid company with a good story. While the merger with a gas company takes away some of the bite, water utilities are valuable and there are limited investment opportunities in the sector in the convertibles space.
The deal is also large and will make a nice contribution to the convertibles universe. “A lot of mandies are going away; it’s good to see something popping up,” a source said.
The tangible equity units also contribute to the diversity of the portfolio, which is important for convertible managers, the source said.
Western Digital upgraded
Western Digital’s 1.5% convertible notes due 2024 were among the top traded issues in the secondary space as stock jumped following an analyst upgrade.
The 1.5% notes were up about 1 point outright to change hands at 90.5. About $15 million of the bonds were on the tape by the late afternoon.
The notes were in focus as stock popped following an upgrade from analysts at Deutsche Bank to “buy” from “hold” due to supply cuts in the NAND industry.
Western Digital stock closed Tuesday at $54.29, an increase of 4.69%.
The disk drive manufacturer and data storage company is expected to report earnings after the market close on April 29.
PDL BioPharma active
PDL BioPharma’s 2.75% convertible notes due 2021 saw some action on Tuesday for a small illiquid issue that rarely trades.
The 2.75% notes were changing hands at 116.875 with about $3 million on the tape. PDL stock closed Tuesday at $3.69, a decrease of 2.89%.
PDL stock has been on the run over the past quarter and increased more than 30%.
Holders were cashing in on the notes – a theme in the convertibles space in the run up to earnings reports.
Investors were showing some caution entering into earnings and capturing some profits from names that have seen large stock moves over the past quarter, a market source said.
Bilibili below par
Bilibili’s 1.375% convertible notes due 2026 were among the most actively traded issues in the secondary space with the notes again below par.
The 1.375% convertible notes were changing hands at 97 early in Tuesday’s session, according to a market source.
The notes rose as high as 98 before closing the day at 97.375, according to Trace data.
About $10 million of the bonds were on the tape by the late afternoon.
Bilibili stock traded as high as $17.55 before closing the day at $17.10, a decrease of 0.47%.
While the 1.375% convertible notes closed out last week hovering around par, they dropped back to the 97 range on Monday as stock dropped 6.22%.
The notes have struggled on an outright basis since hitting the market in early April. However, they have traded largely in line on hedge and maintained their expansion since hitting the market.
Mentioned in this article:
| Aphria Inc: | NYSE: APHA
|
| Aqua America Inc. | NYSE: WTR
|
| Bilibili Inc. | Nasdaq: BILI
|
| PDL BioPharma Inc. | Nasdaq: PDLI
|
| Western Digital Corp. | Nasdaq: WDC
|
|
|
|
|
© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere.
For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.
