Perficient, Retrophin deals on tap; Western Digital, MercadoLibre active; Cree expands

By Abigail W. Adams

Portland, Me., Sept. 4 – All eyes were on the convertibles primary market on the return from Labor Day with many sources expecting a robust week for new deal activity. The expectations were met with two deals launching after the market close.

Retrophin, Inc. plans to price $200 million of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Barclays and Jefferies & Co. are joint bookrunners for the registered offering, which carries a greenshoe of $30 million.

Proceeds will be used to repurchase a portion of the company’s 4.5% convertible notes due 2019.

Retrophin may also exchange, repurchase or induce conversion of an additional amount of the 4.5% notes at the completion of the offering.

Retrophin priced $46 million of the 4.5% convertible notes in a private placement in 2014.

Perficient Inc. plans to price $125 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.875% to 2.375% and an initial conversion premium of 25% to 30%, according to a market source.

Jefferies & Co. and Nomura are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $18.75 million. The deal comes with a call spread.

With focus on the anticipated robust calendar forming for September, trading volume in the secondary space was light with most names moving sideways, sources said.

Western Digital Corp.’s 1.5% convertible notes due 2024 were volume leaders on Tuesday. The notes were down on an outright basis but were largely moving in line dollar-neutral.

MercadoLibre Inc.’s 2% convertible notes due 2028 remained below par in active trading on Tuesday.

Cree Inc.’s 0.875% convertible notes due 2023 were one of the few issues to see price movement on Tuesday with the notes expanding dollar-neutral.

Gabelli Convertible & Income Securities Fund Inc.’s common stock took a hit on Tuesday with stock declining about 9%. However, the current level is where stock was expected to trade after a rights offering, a market source said.

Volume leaders

Western Digital’s 1.5% convertible notes were among the volume leaders on Tuesday with more than $12.25 million of the bonds changing hands in four transactions, according to a market source.

The 1.5% notes were seen trading at 95.5 early in the session. They were seen trading at 95.196 versus an equity price of $59.38 later in the afternoon.

While the notes were down about 1 point on an outright basis, they were trading in line dollar-neutral, a market source said.

Western Digital stock closed on Tuesday at $60.255, a decrease of 4.72%.

The 1.5% convertible bonds have traded below par since the company released its fourth-quarter and year-end financial report on July 26. While below par, the notes continue to trade rich, a market source said.

MercadoLibre’s 2% convertible notes due 2028 also continued to trade below par on Tuesday, which it sank to last Friday after a volatile week.

The notes were seen trading at 99.25 versus an equity price of $343.27. They were largely flat on an outright and dollar-neutral basis, a market source said.

There were about $10 million of the bonds on the tape in the late afternoon.

MercadoLibre stock closed Tuesday at $342.10, a decrease of 0.09%.

The notes had a sloppy secondary market debut on Aug. 22 but recovered on both an outright and dollar-neutral basis. They traded as high as 106 as recently as Aug. 29.

However, the Buenos Aires-based e-commerce company’s convertible notes and stock took a hit alongside Argentina’s currency late last week.

Cree improves

Cree’s 0.875% convertible notes due 2023 were among the few convertible notes to see price movement on Tuesday.

The notes traded between 102 and 102.625 during Tuesday’s session with about $6 million of the bonds on the tape.

They were expanded about 0.75 point dollar-neutral, a market source said.

Cree stock was off on Tuesday, closing the day at $47.49, a decrease of 1.29%.

Gabelli funds rights offering

Gabelli Convertible & Income Securities Fund’s common stock dropped on Tuesday, the ex-rights date following a rights offering.

The common stock traded to a low of $5.92 and a high of $6.25 before closing the day at $6.01, a decrease of 9.08%.

Trading volume was almost 7 times the 90-day average with 190 million shares in play during Tuesday’s session.

The current level is where stock was expected to trade following the fund’s rights offering, a market source said.

Directors of the fund approved a transferable rights offering on Aug. 22 with each shareholder receiving one right per share.

Holders were able to purchase an additional share of common stock with three rights plus a subscription price of $5.25, according to a company press release.

The rights began trading on Aug. 31 with Sept. 4 the ex-rights date for common stock.

Mentioned in this article:

Cree Inc. Nasdaq: CREE

Gabelli Convertible & Income Securities Fund Inc. NYSE: GCV

MercadoLibre Inc. Nasdaq: MELI

Perficient Inc. Nasdaq: PRFT

Retrophin, Inc. Nasdaq: RTRX

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