Bread Financial, Ventas Realty offerings oversubscribed; Ionis convertibles up on debut

By Abigail W. Adams

Portland, Me., June 8 – It was a backloaded week for the convertibles primary market with two new deals set to price after the market close on Thursday after one deal cleared the market the previous session.

Ventas Realty, LP is on deck with a $500 million offering of three-year notes exchangeable for parent company Ventas Inc.’s common shares and Bread Financial Holdings Inc. with a $275 million offering of five-year convertible notes.

Both offerings were heard to be heavily oversubscribed.

The overnight deals were unleashed the day after Ionis Pharmaceuticals Inc. priced its offering of $500 million of five-year convertible notes.

While the primary market saw a lull as markets awaited a resolution to the debt-ceiling debacle, issuers were beginning to bring a backlog of refinancing deals to the market.

The convertibles secondary space saw an uptick of activity as the first new paper since May 25 made its aftermarket debut.

The new paper hit the secondary space on another mixed day for equities with the Dow Jones industrial average closing up 169 points, or 0.50%, the S&P 500 index closing up 0.62%, the Nasdaq Composite index closing up 1.02% and the Russell 2000 index closing down 0.41%.

There was $132 million in reported volume about one hour into the session and $533 million in reported volume about one hour before the market close with Ionis’ convertible notes accounting for the lion’s share of activity in the space.

While Ionis’ new notes closed well off the highs of the day, they maintained a solid dollar-neutral expansion.

While new paper was the focus on Thursday, Affirm Holdings Inc.’s 0% convertible notes due 2026 made strong gains after the company announced approval for the buyback of up to $800 million of the outstanding amount.

Ventas exchangeables eyed

Ventas plans to price a $500 million offering of three-year exchangeable notes after the market close on Thursday with price talk for a coupon of 3.25% to 3.75% and an initial exchange premium of 22.5% to 27.5%.

The deal was heard to be in the market with assumptions of 175 basis points over SOFR and a 24% vol.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk, a source said.

The deal was heard to be as much as 3x oversubscribed.

While demand for the new paper was strong, some were not very enthusiastic about Ventas’ new offering.

The REIT sector, in general, has been badly battered and Ventas’ stock has a high yield, a source said.

Ventas is an investment-grade rated company with the profile of the notes similar to the flood of high-grade convertible issuance in 2023.

Bread Financial eyed

Bread Financial plans to sell $275 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 20% to 25%.

The deal was heard to be in the market with assumptions of 850 bps over SOFR and a 40% vol.

Using those assumptions, the deal looked 2.75 points cheap at the midpoint of talk, a source said.

With a good borrow on the stock and a hefty coupon, the deal played to strong demand.

“It’s a normal convert,” a source said.

Books were heard to have closed in the early afternoon with the offering several times oversubscribed.

Ionis gains on debut

Ionis priced $500 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 1.75% and an initial conversion premium of 32.5%.

Pricing came at the midpoint of talk for a coupon of 1.5% to 2% and at the rich end of talk for an initial conversion premium of 27.5% to 32.5%.

The deal was wall-crossed and covered at launch with proceeds used to refinance the biotech’s 0.125% convertible notes due 2024.

Ionis entered into privately negotiated transactions to repurchase for cash $434.1 million in principal of its 0.125% convertible notes due 2024 for $420.4 million.

The buyback price was 96.7947, a source said.

Ionis’ new 1.75% notes were putting in a strong performance in the aftermarket with the notes rising on an outright and dollar-neutral basis.

The notes were changing hands at 100.875 versus a stock price of $40.34 early in the session, according to a market source.

While the notes continued to rise on an outright basis as stock turned positive, the notes gave back much of their early dollar-neutral gains.

The 1.75% notes were marked at 101.375 bid, 101.875 offered versus a closing price of $41.65.

While the notes expanded as much as 1.5 points dollar-neutral early in the session, they came in and stood poised to close the day with a 0.5 point gain, a source said.

There was $138 million in reported volume.

Ionis’ stock wavered between positive and negative territory early in the session but closed with strong gains.

Stock traded to a low of $40.17 and a high of $41.88 before closing at $41.65, an increase of 2.71%.

Affirm firms

Affirm’s 0% convertible notes due 2026 made large gains on Thursday after the company announced approval for the buyback of $800 million of the notes.

The 0% notes gained 4 points outright to trade up to 75.

“Affirm firmed,” a source said.

The notes were making gains in anticipation of a higher buyback price.

The company’s public announcement about the buyback prior to its execution was not necessarily in its best interest, a source said.

The high-premium notes mostly trade outright.

However, Affirm’s stock also popped on the news and close Thursday at $18.85, an increase of 16.36%.

Affirm announced in a Securities and Exchange Commission filing on Thursday that its board of directors had approved the repurchase of up to $800 million of the 0% convertible notes due 2026 with the company able to repurchase the notes in privately negotiated transactions through Dec. 31, 2023.

Affirm previously announced in February that it had repurchased $229 million in principal of the notes with sources pegging the buyback price at 69.

Mentioned in this article:

Affirm Holdings Inc. Nasdaq: AFRM

Bread Financial Holdings Inc. Nasdaq: BFH

Ionis Pharmaceuticals Inc. Nasdaq: IONS

Ventas Inc. NYSE: VTR

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