Summit Hotel convertibles soar on debut; Sarepta tanks outright, jumps dollar-neutral

By Abigail W. Adams

Portland, Me., Jan. 8 – The convertibles secondary market was active on Friday with new paper entering the space and some major movements in the equities of outstanding issues.

There was $108 million in reported volume about one hour into the session and $600 million on the tape about one hour before the market close, sources said.

Summit Hotel Properties Inc.’s newly priced convertible notes were in focus and trading up on an outright and dollar-neutral basis.

NeoGenomics Inc.’s newly priced 0.25% convertible notes due 2028 remained active. The notes were volatile on an outright basis but were largely unchanged dollar-neutral.

Outside of the new paper, Sarepta Therapeutics Inc.’s 1.5% convertible notes due 2024 were in focus with the notes tanking on an outright basis but skyrocketing dollar-neutral as the company’s stock was cut in half following disappointing results from a clinical trial.

Summit trades up

Summit Hotel priced an upsized $250 million of five-year convertible notes after the market close on Thursday at par at the rich end of talk with a coupon of 1.5% and an initial conversion premium of 37.5%.

Price talk was for a coupon of 1.5% to 2% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

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

The new paper was trading up on an outright and dollar-neutral basis.

The notes traded as high as 103.5 soon after the opening bell but came in as the session progressed.

They were marked at 101.5 bid, 102.25 offered in the late afternoon.

The notes expanded 2 to 2.5 points dollar-neutral.

Summit Hotel’s stock traded to a high of $8.75 and a low of $8.60 before closing the day at $8.61, a decrease of 1.26%.

NeoGenomics day two

NeoGenomics’ 0.25% convertible notes due 2028 remained active their second day in the secondary space.

The notes were volatile on an outright basis. They spiked up in intraday activity but were poised to close the day down from their previous level.

The 0.25% notes traded as high as 108 before settling into a 104-handle in the late afternoon.

While the notes were down about 2 points outright from Thursday’s close, they were largely unchanged dollar-neutral, a source said.

NeoGenomics’ stock traded to a high of $55.25 and a low of $51.30 before closing the day at $52.44, a decrease of 2.02%.

Sarepta in focus

Sarepta Therapeutics’ 1.5% convertible notes due 2024 were the name of the day with the notes tanking outright but skyrocketing dollar-neutral as stock got cut in half following disappointing results from a clinical trial.

The 1.5% notes were down more than 100 points outright.

They traded down to 140.75 in the late afternoon after only recently hitting an all-time high of 252 in the final days of December.

While the notes tanked outright, they soared on hedge, expanding upwards of 9.5 points dollar-neutral.

“I thought they’d do well but I didn’t know they’d do this well,” a source said.

The notes were trading on a 94 delta heading into Friday’s session but were now trading on a 78 delta, a source said.

Sarepta’s stock traded to a high of $88.48 and a low of $82.25 before closing the day at $82.29, a decrease of 51.29%.

Stock was chopped in half after the company announced that its gene therapy treatment for Duchenne muscular dystrophy had failed in clinical trials.

Mentioned in this article:

NeoGenomics Inc. Nasdaq: NEO

Sarepta Therapeutics Inc. Nasdaq: SRPT

Summit Hotel Properties Inc. NYSE: INN

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