Rocket Lab, Barclays synthetic on deck; Immunocore in demand, jumps on trading debut

By Abigail W. Adams

Portland, Me., Jan. 31 – The convertibles primary market continued to roll out offerings on Wednesday with two new deals launching despite a volatile day for markets.

Rocket Lab USA Inc. plans to price $275 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3.75% to 4.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $41.25 million.

Barclays Bank plc plans to sell $250 million of five-year cash-settled equity-linked notes tied to Microsoft Corp. after the market close on Thursday with price talk for an issue price of par, a coupon of 1% and an initial conversion premium of 30%, according to a market source.

Barclays is sole bookrunner for the Securities and Exchange Commission-registered offering, which carries a greenshoe of $37.5 million.

Meanwhile, it was an active day in the convertibles secondary space on Wednesday as the first new paper of the week made its aftermarket debut.

Immunocore Holdings plc priced an upsized $350 million of six-year convertible notes after the market close on Tuesday.

The wall-crossed offering was heavily oversubscribed with the strong demand seen during book building following the notes into the secondary space.

The new paper dominated activity on Wednesday and made meteoric gains on an outright and dollar-neutral basis.

The new paper came on Fed day with the Federal Open Market Committee holding rates steady while eyeing up to three rate cuts in 2024.

Treasuries rallied on the announcement with the 10-year Treasury yield dropping below the 4% threshold to close the day down 11.5 basis points at 3.919%.

However, equity indexes saw heavy selling following the announcement, which squashed market hopes for a March rate cut.

The Dow Jones industrial average closed Wednesday down 317 points, or 0.82%, the S&P 500 index closed down 1.61%, the Nasdaq Composite index closed down 2.23% and the Russell 2000 index closed down 2.45%.

There was $927 million in reported volume at the market close with Immunocore and high-grade names dominating the tape.

Ares Capital Corp.’s 4.625% convertible notes due March 1, 2024 (Baa3/BBB-) saw heavy volume with the notes’ maturity around the corner.

Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB) were also among the top traded issues in the space.

Immunocore in demand

Immunocore priced an upsized $350 million of six-year convertible notes after the market close on Tuesday at par with a coupon of 2.5% and an initial conversion premium of 40%.

The wall-crossed offering was heavily oversubscribed with pricing coming at the rich end of talk for a coupon of 2.5% to 3% and through the rich end of initial talk for a conversion premium of 30% to 35%, according to a market source.

The convertibles were strong out of the gate and continued to shoot higher as the session progressed.

The notes were marked at 105.5 versus a stock price of $70 about one hour after the opening bell.

They continued to climb and were seen trading at 106.625 a short time later.

The notes were trading north of 108 in the late afternoon.

The notes expanded 3 to 3.5 points dollar-neutral early in the session.

They continued to gain and were up 4.5 points dollar-neutral heading into the close, a source said.

The new paper dominated activity in the secondary space with $97 million in reported volume.

Immunocore’s stock traded to a low of $69.12 and a high of $72.89 before closing at $72.29, up 6.87%.

Ares nears maturity

Ares Capital’s 4.625% convertible notes due March 1, 2024 saw heavy volume on Wednesday with the notes set to be taken out in less than one month.

The notes were trading around parity.

The convertibles were changing hands at 104.875 versus a stock price of $20.25 heading into the market close, a source said.

There was $40 million in reported volume.

Ares Capital’s stock traded to a high of $20.60 and a low of $20.21 before closing at $20.23, off 1.84%.

Duke in focus

Duke Energy’s 4.125% convertible notes due 2026 were among the top traded issues of Wednesday’s session with the notes slightly improved in heavy volume.

The notes were wrapped around 99.75 throughout the session, sources said.

There was $35 million on the tape.

Duke’s stock traded to a low of $95.30 and a high of $96.99 before closing at $95.83, up 0.30%.

Mentioned in this article:

Ares Capital Corp. Nasdaq: ARCC

Duke Energy Corp. NYSE: DUK

Immunocore Holdings plc Nasdaq: IMCR

Microsoft Corp. Nasdaq: MSFT

Rocket Lab USA Inc. Nasdaq: RKLB

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