Morning Commentary: Primary market eyes Aurora Cannabis convertible notes offering

By Abigail W. Adams

Portland, Me., Jan. 17 – Market players were eyeing the first convertible bond deal of the year, which is set to price after the market close.

Aurora Cannabis Inc. plans to price $250 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 5% to 5.5% and an initial conversion premium of 10% to 15%.

The deal is being marketed with a credit spread of 500 basis points over Libor and a 40% vol. The terms are attractive and the deal looks incredibly cheap, sources said.

Assuming a 45% vol., the deal looks 8 points cheap at the midpoint of talk, one source said.

However, the borrow on the stock is difficult, sources said. The borrow is about 10%.

The attractive deal terms are most likely to compensate for the borrow, a source said.

The convertible bonds look attractive based on the company’s growth potential, another source said. However, the investment is risky, the source said.

While the primary prepares the first convertible bond deal of the year, Energizer Holdings, Inc.’s newly priced $100-par 7.5% mandatory convertible preferred stock due 2022 remained active their second day in the secondary space.

The new paper was trading down slightly. They were changing hands at 101.875. Energizer common stock was largely flat early in the session with trades around $46.58 shortly before 11 a.m. ET.

The 7.5% mandatory convertible preferred stock traded up to 102.75 and expanded about 0.75 point on their market debut on Wednesday.

Meanwhile, Ligand Pharmaceuticals Inc.’s 0.75% convertible notes due 2023 remained active early in Thursday’s session after dominating activity on Wednesday.

The notes were up about 0.5 point on an outright basis to 84, a market source said.

Ligand stock was on the rebound early Thursday, trading up to $113.99, an increase of 3.58%, shortly before 11 a.m. ET.

Ligand’s 0.75% convertible notes due 2023 took a beating on Wednesday dropping more than 6 points outright and contracting 3 points dollar-neutral after short-seller Andrew Left’s Citron Research took aim at the company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.