Evolent Health hits the market; Aegean Marine notes eyed; Ligand, Exact Sciences active

By Abigail W. Adams

Portland, Me., Oct. 18 – The secondary convertibles space opened Thursday with $150 million in new paper hitting the market.

Evolent Health, Inc. priced an upsized $150 million seven-year convertible notes after the market close on Wednesday.

The new paper dominated trading activity in the secondary space and were expanding on their market debut.

Ligand Pharmaceuticals Inc.’s 0.75% convertible notes due 2023 were the next most actively traded issue in the secondary space with stock volatile during Thursday’s session.

The notes were trading inline to slightly improved on a dollar-neutral basis.

Exact Sciences Corp.’s 1% convertible notes due 2025 saw a fresh round of action as stock dropped after the company announced an acquisition.

While down outright, the convertible notes were expanding on the news.

Meanwhile, market players were eyeing the soon to mature convertible notes of Aegean Marine Petroleum Network Inc. with the notes continuing to be offered lower.

Equities saw another turbulent session with the Dow Jones industrial average closing the day down 327 points.

As equities have whipsawed between gains and losses throughout the week, hedge accounts have reaped the benefits with returns on the rise, sources said.

“The market swings are great for hedge accounts,” a market source said.

Evolent Health expands

Evolent Health priced $150 million of seven-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 1.5% and an initial conversion premium of 32.5%.

Price talk had been for a coupon of 1.25% to 1.75% and an initial conversion premium of 30% to 35%, according to a market source.

The initial size of the deal had been for $125 million. The greenshoe was also upsized to $22.5 million from $18.75 million.

The new paper hit the secondary space strong. It was seen trading between 101 to 101.5 with stock down about 1% early in the session, according to a market source.

The notes continued to trade in a tight range and were seen changing hands at 101.375 by late afternoon.

They were expanded at least 1 point dollar-neutral, a market source said.

The notes were trading on a 65% delta.

Evolent Health stock closed Thursday at $24.96, a decrease of 1.07%.

More than $46 million of the bonds were on the tape during Thursday’s session with a good mix of outright and swap trades, sources said.

There were more buyers than sellers for the new notes.

“That’s pretty good for a small issue,” a market source said. “It’s trading like it was a much larger deal.”

The assumptions used for pricing, a credit spread of 400 basis points over Libor and a 40% vol., were conservative with the deal probably cheaper than it modeled, the source said.

Sources pegged the deal between fair value and 0.65 point cheap at the midpoint of talk.

Ligand in line

Ligand Pharmaceuticals’ 0.75% convertible notes due 2023 were active in the secondary space as stock saw a volatile session.

The notes traded to a high of 105.5 with stock up early but came in alongside stock as the session progressed.

They were seen trading at 103.25 versus an equity price of 198.66 in the mid-afternoon, according to a market source.

The notes were flat to expanded about 0.25 point dollar-neutral, a market source said.

Ligand stock traded to a high of $209.00 and a low of $196.00 before closing Thursday at $197.06, a decrease of 2.93%.

More than $16 million of the bonds changed hands during Thursday’s session.

Ligand stock has trended lower since it hit its 52-week high of $274.00 in late September.

Exact Sciences’ acquisition

Exact Sciences’ 1% convertible notes due 2025 saw a fresh round of activity on Thursday as stock dropped after the medical diagnostic company announced an acquisition.

The 1% convertible notes were down about 2.5 points outright. They were seen trading at 108.5 versus an equity price of $63.14.

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

Exact Sciences stock closed Thursday at $63.49, a decrease of 3.88%.

Stock was trading down after the medical diagnostic company announced its acquisition of Biomatrica, a supplier of sample collection tubes, prior to the market open.

Aegean Marine maturing soon

Market players were eyeing the soon to mature convertible notes of Aegean Marine Petroleum. The company’s 4% convertible notes come due on Nov. 1.

There is $128.25 million outstanding, according to Trace data.

The notes were offered as low as 60 on Thursday, but there were no bids, a market source said.

“Something’s about to happen in that one,” another source said.

The 4.25% convertible notes due 2021 also trade on a 60 handle.

Aegean’s convertible notes tanked in June after the company disclosed accounting errors in its 2017 financial report.

However, the notes were expected to rebound after Mercuria Energy Group provided the company with a $1 billion trade finance facility in July.

The rebound failed to materialize.

Prior to the June announcement, the 4% convertible notes traded around 95.

With the maturity of the 4% notes less than two weeks away, the company is primed for a recapitalization or restructuring, a market source said.

Mentioned in this article:

Aegean Marine Petroleum Network Inc. NYSE: ANW

Evolent Health, Inc. NYSE: EVH

Exact Sciences Corp. Nasdaq: EXAS

Ligand Pharmaceuticals Inc. Nasdaq: LGND

© 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.