Morning Commentary: Ascendis convertibles gain, Blackstone drops in secondary debut

By Abigail W. Adams

Portland, Me., March 25 – The first new paper in almost two weeks hit the convertibles secondary space on Friday.

Ascendis Pharma A/S priced $500 million of six-year convertible notes and Blackstone Mortgage Trust Inc. priced $300 million of five-year convertible notes after the market close on Thursday.

The deals were the first to clear the primary market since Travere Therapeutics Inc. priced its $316.25 million issue of 2.25% convertible notes due 2029 on March 8.

The new deal activity comes with one week left to the first quarter.

The first quarter of 2022 has been one of the lowest volume quarters for new deal activity since 2016, according to a market source.

Even with the strong rally of the previous week, tech and growth stocks remain badly battered with the current market environment still inhospitable to equity-linked financing, a source said.

The new paper was putting in mixed performances in the secondary space with Blackstone Mortgage dropping below par in active trading while Ascendis posted strong gains on an outright and dollar-neutral basis.

Ascendis expands

Ascendis Pharma priced $500 million of six-year convertible notes after the market close on Thursday at par with a coupon of 2.25% and an initial conversion premium of 42.5%.

Pricing came at the midpoint of talk for a coupon of 2% to 2.5% and at the rich end of talk for an initial conversion premium of 37.5% to 42.5%, according to a market source.

The new paper was putting in a strong performance in the secondary space.

The notes traded as high as 102.75 early in the session but came in with stock to trade around 100.5 to 101 about one hour into the session.

The notes expanded about 2 points on hedge, a source said.

Ascendis’ stock was changing hands at $116.40, a decrease of 0.28%, shortly before 11 a.m. ET.

Approximately $116.7 million of net proceeds will be used to fund a share repurchase.

Blackstone below par

Blackstone Mortgage Trust priced $300 million of five-year convertible notes after the market close on Thursday at par with a coupon of 5.5% and an initial conversion premium of 15%.

Pricing came cheaper than initial talk for a coupon of 4.75% to 5.25% and at the cheap end of talk for an initial conversion premium of 15% to 20%, according to a market source.

The new paper was not performing well in the secondary space.

The notes were on a 99-handle with stock up early in the session.

The convertibles were changing hands at 99.375 about one hour into the session, a source said.

Blackstone Mortgage’s stock was trading at $31.85, an increase of 0.98%, shortly before 11 a.m. ET.

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