Microchip’s new deals trade ‘around par’ post-pricing; Acorda gains; Immunomedics rises

By Stephanie N. Rotondo

Seattle, Feb. 10 – The convertible bond market was zeroed in on Microchip Technology Inc.’s new $2.3 billion deal in Friday trading.

At the open, Microchip said it had priced $1.8 billion of 1.625% convertible senior subordinated notes due 2027 and $500 million of 2.25% convertible junior subordinated notes due 2037.

In early dealings, a trader said the issues accounted for $217 million of the total $319 million in trading volume. Both were trading around par by the close.

As for Microchip’s other outstanding issues, the 1.625% convertible notes due 2025 were quite busy, though a touch lower on the heels of the new deal.

Among other deals priced during the week, Pretium Resources Inc.’s $90 million of 2.25% convertible senior subordinated notes due 2022 – a deal priced on Wednesday – were seen at 102.5 at the bell, down from 103.5 previously.

Earlier in the day, a trader said he saw trades as high as 103.75.

The company’s stock meantime held steady at $11.67.

Meanwhile, Acorda Therapeutics Inc.’s 1.75% convertible notes due 2025 remained on the radar.

A trader said the paper had been active on Thursday, trading at least 25 times in round-lots. By mid-morning on Friday, the issue had traded at least 11 times.

“People are falling all over themselves to buy this issue,” the trader said.

The convertibles added 3 to 4 points on the day, as the market reacted positively to word that the company gained a longer-than-expected exclusivity period on one of its drug products.

Also in the pharmaceutical space, Immunomedics Inc.’s 4.75% convertible notes due 2020 followed the company’s equity higher on news of a $2 billion licensing deal.

One trader saw the issue at 123.5 versus a share price of $5.32, on a 60% delta.

Another market source pegged the paper just south of 121.5, a gain of nearly 16 points on the day.

The stock jumped 93 cents, or 21.63%, to $5.23.

Immunomedics said Friday that it had inked the development and licensing deal with Seattle Genetics Inc. on an experimental cancer drug that has thus far seen good clinical trial results.

Under the terms of the deal, Immunomedics will receive a $250 million upfront cash payment. Should the deal fall apart, Seattle Genetics will retain a 2.8% stake in Immunomedics, with an option to increase its holdings.

Microchip deal takes focus

Microchip Technology sold $2.3 billion of new convertible notes via a two-tranche Rule 144A offering on Friday.

The company sold $1.8 billion of 1.625% convertible senior subordinated notes due 2027 with an initial conversion premium of 42.5%. That was at the rich end of the 1.625% to 2.125% yield talk, with an initial conversion premium of 37.5% to 42.5%.

That issue was upsized from $1.5 billion.

Additionally, another $500 million of 2.25% convertible junior subordinated notes due 2037 were sold, with an initial conversion premium of 40%. That also came at the rich end of the 2.25% to 2.75% talk and at the midline of the 37.5% to 42.5% premium talk.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC, BofA Merrill Lynch, BMO, HSBC and U.S. Bank ran the books.

Toward the end of the day, a trader saw both pieces at 99.875.

The 1.625% convertibles were the busier of the two, a trader said earlier in the day, trading in a 99.75 to 100.125 context. The 2.25% notes were “right around par as well,” in a par to 100.25 range.

The underlying stock was off 3 cents at $70.90.

“Not a whole lot of gamma there,” a trader noted.

As for the company’s older issues, the 1.625% convertible notes due 2025 closed in a 138 to 139 range, down from 139 to 140 previously.

Conversions will be settled with cash, common stock or a combination, at the company’s option. The conversion rate on the 10-year deal is 9.8936 shares per each $1,000 of notes, representing a conversion price of $101.08 per share. The conversion rate on the 20-year deal is 10.0703 shares per each $1,000 of notes, equaling a conversion price of $99.30.

The conversion rate on both issues is subject to increase – by 4.9468 and 5.0352 shares, respectively – in the event the stock price exceeds the base conversion price.

The convertibles are contingently convertible prior to Nov. 15, 2026 for the 2027 notes and to Nov. 15, 2036 for the 2037 notes. After those respective dates, the bonds are convertible at any time.

Proceeds will be used to pay down debt and for general corporate purposes.

Microchip Technology is a Chandler, Ariz.-based manufacturer of microcontroller, memory and analog semiconductors.

Acorda on the rise

Acorda Therapeutics’ 1.75% convertibles were improving on Friday, boosted by news it had gained exclusive rights on its Ampyra drug.

One market source called the issue up over 5 points, trading with an 89 handle. Another saw the paper at 89 bid, 90 offered.

The second source deemed that up 3 to 4 points on the day.

At mid-morning, a trader saw the issue at 89.625 versus a share price of $25.25.

“The stock is up a lot over the past couple of weeks,” the trader further commented.

The shares finished the session at $24.80, up 15 cents.

The movement in the name came as the company said it had inked a settlement deal with Apotex Corp. over a patent infringement case. The case, brought by Acorda against Apotex, was in regards to Apotex’s plan to bring a generic version of Acorda’s Ampyra drug to market. Under the settlement, Apotex has to wait until 2025 to sell the generic version.

“The exclusivity is longer than people feared it might be,” a trader explained, deeming the news a “positive” for Acorda.

Acorda is an Ardsley, N.Y.-based biotechnology company.

Mentioned in this article:

Acorda Therapeutics Inc. Nasdaq: ACOR

Immunomedics Inc. Nasdaq: IMMU

Microchip Technology Inc. Nasdaq: MCHP

Pretium Resources Inc. NYSE: PVG

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