Morning Commentary: Callaway Golf, NeoGenomics convertibles expand on debut

By Abigail W. Adams

Portland, Me., April 30 – The convertibles primary market logged its most active week of the year for new deal activity with two upsized offerings bringing the weekly tally to $3.6 billion.

Callaway Golf Co. priced an upsized $225 million of six-year convertible notes and NeoGenomics Inc. priced an upsized $175 million of five-year convertible notes after the market close on Wednesday.

The new paper was in demand during bookbuliding and in the aftermarket with both offerings trading up on an outright and dollar-neutral basis on their secondary market debut on Thursday.

Callaway in demand

Callaway Golf priced an upsized $225 million of six-year convertible notes after the market close on Wednesday at par at the rich end of talk with a coupon of 2.75% and an initial conversion premium of 30%.

Talk had been tightened to a coupon of 2.75% to 3% and an initial conversion premium of 30%, according to a market source.

Initial price talk was for a coupon of 3% to 3.5% and an initial conversion premium of 25% to 30%.

The greenshoe was also upsized to $33.75 million.

The initial size of the deal was $200 million with a greenshoe of $30 million.

The deal saw heavy demand during bookbuilding, especially from outright accounts, with the offering as much as 6x oversubscribed, a source said.

The demand followed the notes into the secondary space.

They were marked at 102.5 bid, 103.5 offered on an outright basis and were trading at 100.5 bid, 101 offered versus a stock price of $13.55 on swap, a market source said.

The notes saw heavy volume with a large amount of trades printing pre-market open, another source said.

There was about $80 million in reported volume one hour into the session.

Callaway stock was changing hands at $14.30, an increase of 5.54%, shortly before 11 a.m. ET.

NeoGenomics skyrockets

NeoGenomics priced an upsized $175 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 1.25% and an initial conversion premium of 27.5%.

Pricing came at the rich end of talk for a coupon of 1.25% to 1.75% and at the midpoint of talk for an initial conversion premium of 25% to 30%, according to a market source.

The greenshoe was also upsized to $26.25 million.

The initial size of the deal was $150 million with a greenshoe of $22.5 million.

Concurrently with the convertible notes offering, the company priced a secondary offering of 4.4 million shares at $28.50 per share.

Underwriters of the secondary offering also offered 1.065 million of borrowed stock to facilitate the hedging transactions of purchasers of the convertible notes.

While volume was light, the notes were making gains on an outright and dollar-neutral basis.

The 1.25% notes were marked at 102.25 bid, 103.25 offered outright and were changing hands at 102.5 bid, 103.5 offered versus a stock price of $28.50 on swap.

NeoGenomics stock was changing hands at $28.29, a decrease of 8.95%, shortly before 11 a.m. ET.

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