MGP Ingredients convertibles on tap; Amyris upsizes; SmileDirectClub notes crushed

By Abigail W. Adams

Portland, Me., Nov. 9 – The convertibles primary market continued to roll out new offerings with two deals totaling $700 million set to price after the market close on Tuesday and one $175 million offering on deck for Wednesday.

MGP Ingredients Inc. plans to price $175 million of convertible notes due 2041 after the market close on Wednesday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 35% to 40%, according to a market source.

Wells Fargo Securities LLC is the bookrunner for the Rule 144A offering, which carries a greenshoe of $26.25 million.

In the latest refinancing deal, Cryoport Inc. plans to price $300 million of five-year convertible notes with proceeds to be used to repurchase a portion of the company’s 3% convertible notes due 2025.

Amyris Inc. is also on deck with an upsized $600 million offering of five-year convertible notes.

Amyris’ and Cryoport’s deals were in demand during bookbuilding with both offerings heard to be well oversubscribed.

Given the shortage of new paper recently, the new notes are expected to trade well when they make their aftermarket debut on Wednesday.

Meanwhile, it was an active day in the secondary space as convertibles issuers continued to see huge movements in their equity.

New Relic Inc.’s 0.5% convertible notes due 2023 were in focus with the notes making large gains on an outright basis as stock surged following an earnings beat.

However, SmileDirectClub Inc.’s 0% convertible notes due 2026 dropped double digits as stock got crushed following earnings.

Cryoport on tap

Cryoport plans to price $300 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 40% to 45%.

The deal was heard to be in the market with assumptions of 400 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 0.62 point cheap at the midpoint of talk.

The deal is pricing concurrently with a secondary offering.

Proceeds from the convertible notes offering will be used to repurchase a portion of the company’s 3% convertible notes due 2025 in privately negotiated transactions.

The 3% convertible notes are deep-in-the-money and trade at triple par.

The new offering was heard to be oversubscribed with books closing in the early afternoon.

However, the deal was largely spoken for with holders of the 3% notes switching to the new issue, a source said.

Amyris upsizes

Amyris’ offering of five-year convertible notes were in demand during bookbuilding with the offering upsizing to $600 million from $400 million, a source said.

The deal is believed to be pricing on the rich end of talk for a coupon of 1.5% to 2% and an initial conversion premium of 30% to 35%.

The deal is in the market with assumptions of 550 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 3.15 points cheap at the midpoint of talk.

While the biotech company has priced convertible notes in the past, they have been more akin to structured financing than standard convertible issuance.

The company is a dramatically different company than it was just a few months ago, a source said.

While Amyris’ stock was taking a hit on the heels of the convertible notes offering and closed the day at $7.96, a decrease of 38.67%, it has skyrocketed more than 500% in the past year.

New Relic in focus

New Relic’s 0.5% convertible notes due 2023 dominated activity in the secondary space on Tuesday with the convertible notes surging alongside stock following a large earnings beat.

The 0.5% notes rose more than 18 points outright with stock up more than 38%.

The notes were changing hands at 127.25 versus a stock price of $123.90 in the late afternoon.

There was more than $30 million in reported volume.

New Relic’s stock traded to a low of $113.83 and a high of $127.50 before closing the day at $125.97, an increase of 38.35%.

The data analytics company reported losses per share of 10 cents versus analyst expectations for losses per share of 13 cents. Revenue was $195.69 million versus the $182.21 million expected.

SmileDirectClub lower

SmileDirectClub’s 0% convertible notes due 2026 saw their downward spiral accelerate following another disastrous earnings report.

The 0% convertible notes sank 16 points outright with stock down 20%.

They were changing hands on a 53-handle in the late afternoon.

“That smile got kicked in the mouth,” a source said.

“How did these guys get a 0% coupon,” another source said.

While the notes were largely an outright play due to the difficulty with the borrow, if the notes did trade on hedge, they would have contracted upward of 8 points, a source said.

SmileDirectClub’s stock traded to a high of $4.33 and a low of $3.90 before closing the day at $4.17, a decrease of 20.57%.

Stock cratered after the company reported losses per share of 22 cents versus analyst expectations for losses of 12 cents.

Revenue was $137.68 million versus analyst expectations for revenue of $182.51 million.

Mentioned in this article:

Amyris Inc. Nasdaq: AMRS

Cryoport Inc. Nasdaq: CYRX

MGP Ingredients Inc. Nasdaq: MGPI

New Relic Inc. NYSE: NEWR

SmileDirectClub Inc. Nasdaq: SDC

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