Convertibles primary prices $1.77 billion; Wolfspeed, indie trade up; Inotiv tanks

By Abigail W. Adams

Portland, Me., Nov. 17 – The convertibles primary market took a breather on Thursday after pricing $1.765 billion over three deals on Wednesday, bringing the weekly tally to $3.265 billion over five deals.

Wolfspeed Inc. priced an upsized $1.525 billion of seven-year convertible notes, indie Semiconductor Inc. priced an upsized $140 million of five-year convertible notes and Brookdale Senior Living Inc. sold $125 million of $50-par three-year tangible equity units after the market close on Wednesday.

The past week marks the second highest volume week of the year for new deal activity, ranking behind only the Sept. 11 week when $4.115 billion priced in three deals.

The convertible notes played to strong demand during bookbuilding with the market flush with cash after some large-scale redemptions and hungry for new paper, sources said.

The convertible notes were putting in a strong performance out of the gate despite continued selling in equities.

“Not bad for a bear market day,” a source said.

However, Brookdale’s equity units were struggling outright with the notes several points below par.

While down outright, the notes were holding up well on hedge and saw a nominal dollar-neutral expansion.

Equities were again in the red on Thursday as weak earnings from retailers, hawkish comments from Federal Reserve officials and upwardly revised Federal Funds target rates weighed on markets.

While down, the equity indexes closed well off the lows of the day.

The Dow Jones industrial average closed Thursday down 7.5 points, or 0.02%, the S&P 500 index closed down 0.31%, the Nasdaq Composite index closed down 0.35% and the Russell 2000 index closed down 0.76%.

The secondary space was relatively quiet outside of new and recent deals.

While volume in the name was light, Inotiv Inc.’s 3.25% convertible notes due 2027 were the largest losers in the space with the notes dropping double digits outright and seeing an outsized dollar-neutral contraction after stock was slashed in half following a criminal probe.

Wolfspeed jumps

Wolfspeed priced an upsized $1.525 billion of seven-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 1.875% and an initial conversion premium of 35%.

Price talk was for a coupon of 1.625% to 2.125% and an initial conversion premium of 32.5% to 37.5%.

The greenshoe was also upsized to $225 million.

The initial size of the offering was $1.3 billion with a greenshoe of $200 million.

The deal played to heavy demand with BorgWarner, a Durham, N.C.-based automotive supplier, taking down $500 million of the offering as part of a strategic partnership that entitles it to purchase $650 million of devices annually.

The new 1.875% notes jumped out of the gate.

They were changing hands at 102.25 versus a stock price of $88.18 early in the session.

The notes continued to climb as stock improved and traded as high as 104.5.

They expanded 1.5 points to 1.75 points dollar-neutral, a source said.

There was $250 million in reported volume heading into the close with the bonds accounting for nearly one-third of the total $766 million on the tape during Thursday’s session.

Wolfspeed’s outstanding 0.25% convertible notes due 2028 remained active on Thursday with the notes improved after a large dollar-neutral contraction the previous session.

The notes traded at 96.25 versus a stock price of $90.09 heading into the close.

They expanded about 0.5 point dollar-neutral, a source said.

There was $23 million in reported volume.

Wolfspeed’s stock traded to a high of $92.59 and a low of $87.05 before closing the day at $90.77, an increase of 3.02%.

indie upsizes

indie Semiconductor priced an upsized $140 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 4.5% and an initial conversion premium of 30%.

Pricing came at the midpoint of talk for a coupon of 4.25% to 4.75% and at the rich end of talk for an initial conversion premium of 25% to 30%, according to a market source.

The greenshoe was also upsized to $20 million.

The initial size of the offering was $125 million with a greenshoe of $18.75 million.

The new paper also saw a strong start with the 4.5% notes marked at 101 bid early in the session, a source said.

They continued to climb on an outright basis as the session progressed and were changing hands at 103.5 versus a stock price of $6.74 in the late afternoon.

The notes expanded 1.5 points dollar-neutral, sources said.

There was $13 million in reported volume.

indie’s stock traded to a high of $7.08 and a low of $6.61 before closing the day at $6.74, an increase of 1.28%.

Brookdale struggles

Brookdale priced $125 million of $50-par three-year tangible equity units after the market close on Wednesday at par with a yield of 7% and an initial conversion premium of 17.5%.

Pricing came at the midpoint of talk for a yield of 6.75% to 7.25% and at the rich end of talk for a conversion premium of 12.5% to 17.5%.

The new paper struggled outright out of the gate.

The securities were marked at $46.25 bid, $46.75 offered in early trade, a source said.

The units traded up to a $48-handle as the session progressed.

While the units were well below par on an outright basis, they were holding well on hedge with the units expanding about 0.25 point dollar-neutral.

Brookdale’s stock traded to a low of $2.88 and a high of $3.22 before closing the day at $3.11, a decrease of 5.47%.

Bananas

While volume in the name was light, Inotiv’s 3.25% convertible notes due 2027 saw the largest price movement of Thursday’s session – to the downside.

The 3.25% notes sank 20 points outright with stock slashed in half after the biotech announced that employees of its principal supplier of non-human primates were facing criminal charges for illegal importation.

The 3.25% convertible notes were marked down to 61 late Thursday afternoon.

They contracted 6 points dollar-neutral, a source said.

Inotiv’s stock traded to a high of $15.38 and a low of $6.55 before closing the day at $6.82, a decrease of 56.97%.

Stock tanked after the company disclosed that the U.S. Attorney’s Office for the Southern District of Florida had criminally charged employees of its principal supplier for the illegal importation of non-human primates.

Two companies acquired by Inotiv were already facing grand jury subpoenas from the attorney’s office regarding the importation of primates.

Mentioned in this article:

Brookdale Senior Living Inc. NYSE: BKD

indie Semiconductor Inc. Nasdaq: INDI

Inotiv Inc. Nasdaq: NOTV

Wolfspeed Inc. NYSE: WOLF

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