GFL units on tap; Bandwidth convertible offering eyed; Exact Sciences notes volatile

By Abigail W. Adams

Portland, Me., Feb. 25 – The convertibles primary market remained active on Tuesday, despite another brutal day for equities.

Bandwidth Inc. plans to price $300 million of six-year convertible notes after the market close on Tuesday.

The deal was heard to be oversubscribed and moving forward despite market conditions.

GFL Environmental Inc. plans to price $700 million, or 14 million units, of $50-par three-year tangible equity units after the market close on March 3 with price talk for a dividend of 5.75% to 6.25% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

J.P. Morgan Securities, BMO Capital Markets, Goldman Sachs & Co. LLC, RBC Capital Markets and Scotiabank are joint lead bookrunners for the registered offering.

Barclays, BC Partners, Raymond James, Stifel and TD Securities Inc. are joint bookrunners.

The units are pricing concurrently with GFL Environmental’s IPO of 71,652,440 shares, which will be priced between $20.00 and $21.00 per share.

Meanwhile, Exact Sciences Corp.’s newest offering was “the talk of the town,” a market source said.

The new paper was volatile on its market debut and traded up in the morning but sank below par in intraday trading.

The company’s outstanding issues were contracting on the heels of the new offering.

Palo Alto Networks Inc.’s 0.75% convertible notes due 2023 were down outright but up on hedge following its earnings report.

Bandwidth eyed

In an overnight deal, Bandwidth plans to price $300 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be marketed with assumptions of 375 basis points over Libor and a 40% vol.

Using those assumptions, the deal modeled about 1.5 points cheap at the midpoint of talk, a source said.

The deal was heard to be oversubscribed and moving forward despite the extension of losses for equities.

“The carnage won’t stop them,” a source said. The deal was heard to be pricing at the mids or toward the rich end of coupon talk.

Exact Sciences dominates

Exact Sciences’ newest offering was “the talk of the town,” a market source said.

Many were surprised to see such a large deal clear the primary market in the midst of such a significant sell-off in equities.

In an overnight deal on Monday, the Madison, Wis.-based molecular diagnostics company priced an upsized $1 billion of eight-year convertible notes at par with a coupon of 0.375% and an initial conversion premium of 27.5%.

Pricing came in line with talk for a fixed coupon of 0.375% and a fixed initial conversion premium of 27.5%, according to a market source.

The greenshoe was also upsized to $150 million. The initial size of the deal was $850 million with a greenshoe of $127.5 million.

The new paper dominated activity in the secondary space and was volatile on debut.

The new 0.375% convertible notes due 2028 were changing hands between 101 and 101.5 with stock off more than 8% about one hour into Tuesday’s session, a market source said.

However, the notes sank as stock continued its decline.

The new 0.375% notes were marked at 98.625 bid, 99.375 offered versus a stock price of $84.00 in the late afternoon.

However, the notes rebounded into the close and ended Tuesday’s session at 100.8 versus the closing price of stock.

For those who were able to hedge the notes against the morning’s stock price of $88.50, the notes expanded about 1.5 points dollar-neutral, a market source said.

Others were not so lucky, the source said.

While Exact Sciences’ newest offering saw a volatile market debut, its outstanding issues were contracting.

Exact Sciences’ 0.375% convertible notes due 2027 traded off almost 8 points outright to 106.625.

They were contracted about 1 point dollar-neutral, a market source said.

The 1% convertible notes due 2025 were also down about 1 point dollar-neutral.

While volume was light, the 1% convertible notes were changing hands around 150 on Tuesday.

Exact Sciences stock traded to a low of $83.90 and a high of $89.14 before closing the day at $86.54, a decrease of 9.44%.

Exact Sciences is a serial issuer of convertible notes with approximately $900 million outstanding of its 1% convertible notes due 2025 and $747 million outstanding of its 0.375% convertible notes due 2027, according to Trace data.

Approximately $150 million of net proceeds from the latest offering will be used to repurchase a portion of the company’s 1% convertible notes due 2025.

Palo Alto expands

Palo Alto’s 0.75% convertible notes due 2023 were down outright but expanding dollar-neutral as stock sank more than 18% following its second-quarter earnings report.

The 0.75% notes dropped 6 points outright. They were changing hands around 104.5 in the mid-afternoon.

However, the notes were up 0.5 point on hedge, a market source said.

Palo Alto stock traded to a low of $192.18 and a high of $203.90 before closing the day at $196.96, a decrease of 17.01%.

The cybersecurity company reported earnings per share of $1.19, which beat analyst expectations for earning per share of $1.12.

However, the company missed on the top line with revenue of $816.7 million versus analyst expectations for revenue of $843.26 million.

Five analysts lowered their rating on Palo Alto stock following the report, resulting in the worst single-day percentage drop for the stock since 2017, Market Watch reported.

Mentioned in this article:

Bandwidth Inc. Nasdaq: BAND

Exact Sciences Corp. Nasdaq: EXAS

Palo Alto Networks Inc. NYSE: PANW

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