New Insulet in line to better on debut; old Insulet slips; Ctrip.com, Inphi remain firm

By Rebecca Melvin

New York, Sept. 8 – Insulet Corp.’s new 1.25% convertibles due 2021 traded actively and in line to slightly better on a dollar-neutral, or swap, basis on Thursday after the Bedford, Mass.-based medical device maker priced an upsized $300 million of the five-year senior notes at the rich, or tight, end of talked terms.

The Insulet 1.25% convertibles were seen late in the session at 100.5 to 101.5 against the common shares that were down about 50 cents, or 1%.

Earlier in the session the bonds were trading a bit higher when shares were not as low. At that point, the bonds were seen better on a swap basis by a point, according to a syndicate source. When the bonds were 101.375 the shares were at about $43.78.

Insulet’s older 2% convertible due 2019, a chunk of which is being repurchased with proceeds of the new deal, traded down, or came in, somewhat.

Other new or recently priced issues were also trading in the convertibles market on Thursday.

Ctrip.com International Ltd.’s 1.25% convertibles due 2022, a $900 million issue that debuted in the market on Wednesday, traded at 101, which was up about 0.5 point on the day, versus the underlying American Depositary Shares that were up 41 cents, or 0.9%, at $45.36 at the close. The shares of the Shanghai-based travel services provider had dropped hard when the convertibles issue, along with a secondary stock offering, were announced on Tuesday.

Several of Ctrip.com’s older convertibles were also trading. The Ctrip.com 1% convertibles due 2020 traded at 109.16, which was up 1.16 points on the day, according to Trace data. The Ctrip.com 1.99% convertibles due 2025 traded at 112.8, which was little changed compared to its previous level, and the Ctrip.com 1.25% convertibles due 2018 traded at 128.2, which was down nearly 0.5 point.

Also trading was Ctrip.com competitor Priceline Group Inc. The Norwalk, Conn.-based online travel company’s 0.9% convertibles due 2021 changed hands at 106.75, and the Priceline 0.35% convertibles due 2020 traded at 126.197, which was up 0.5 point, according to Trace data.

Inphi Corp.’s 0.75% convertible due 2021, which also debuted in the convertibles market on Wednesday, traded little changed at 101.25. While the common shares of the Santa Clara, Calif.-based communications chip maker were down 23 cents, or 0.6%, at $40.95 at the market close.

The primary market remained vibrant with PDC Energy Inc. launching an overnight deal for $100 million of five-year convertibles. The Denver-based energy company’s paper was due to price ahead of the market open on Friday at a 1.25% to 1.75% yield and a 27.5% to 32.5% premium.

Meanwhile, Advanced Micro Devices Inc. was on tap after the market close on Thursday with a $450 million deal of 10-year notes that was expected to price.

Equities were lower. In Europe, the European Central Bank opted to leave interest rates unchanged after a meeting of policymakers. Also ECB economists cut their growth forecast for next year to 1.6% from 1.7% and lowered their inflation forecast to 1.2% from 1.3%. Three other major central banks are set to meet this month to review their monetary policies, including the U.S. Federal Reserve, and the central banks of Japan and England.

Insulet trades in line to better.

Insulet’s new 1.25% bond traded at late morning at 101.375 when the common shares were at about $43.78. The bond traded very actively and was the centerpiece of the day’s action. At late morning, a syndicate source said they were up about a point on swap.

At the close, a trader said the new paper had held in around 101 all day.

“Basically, it is trading in line with the stock, at 101 ish,” the trader said.

Insulet’s older 2% convertibles due 2019, which are being repurchased, traded at 112.5 during the session and that was seen lower compared to the takeout price.

Insulet’s new deal was upsized to $300 million from $250 million and the 1.25% five-year convertible senior notes priced at the rich end of talk for a 1.25% to 1.75% coupon and a 27.5% to 32.5% premium.

The greenshoe was upsized to $45 million from $37.5 million.

The joint bookrunners were Morgan Stanley & Co. LLC and Wells Fargo Securities LLC.

The notes are non-callable for three years and then are provisionally callable if shares exceed 130% of the conversion price. There are no puts.

They have contingent conversion at the 130% share price threshold and net share settlement.

There is dividend protection for any dividends paid and takeover protection via a standard make-whole matrix.

The company plans to use about $154 million of the proceeds to repurchase about $134 million of its 2% convertible senior notes due 2019. The remaining proceeds will be used for general corporate purposes, which may include buying back more of Insulet's remaining 2% convertibles, as well as investment in its manufacturing and supply chain operations.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Ctrip.com International Ltd. Nasdaq: CTRP

Inphi Corp. Nasdaq: IPHI

Insulet Corp. Nasdaq: PODD

PDC Energy Inc. Nasdaq: PDCE

Priceline Group Inc. Nasdaq: PCLN

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