Insulet, Arbor Realty deals hit market; Sarepta upsizes deal; GNC and Aegean Marine plummet

By Abigail W. Adams and Rebecca Melvin

Portland, Me., Nov. 8 – Insulet Corp. and Arbor Realty Trust Inc. priced new deals that hit the market Wednesday. There was heavy demand for Insulet’s 1.375% convertibles due 2024, which were trading between 101 and 102 on an outright basis in their debut, as the stock traded off, according to market sources.

After the market close, Sarepta Therapeutics Inc. priced an upsized $475 million of seven-year convertible notes at the tight end of talked terms. The deal was upsized from an initially talked size of $375 million.

Back in established issues, Aegean Marine Petroleum Network Inc.’s convertibles and stocks plummeted after the company announced a third-quarter loss late Tuesday. Aegean’s 4% convertible note due 2018 fell 11 points to 87.5 during early morning trades on Wednesday.

GNC Holdings Inc.’s 1.5% convertibles due 2020 continued to lose ground after the company formally announced its plan to offer new senior secured notes on Wednesday. The company will sell $500 million of the five-year notes, Prospect News reported.

New Insulet expands 3 points

Insulet’s 1.375% convertibles due 2024 traded between 101 and 102 on an outright basis. Insulet stocks were conversely trading lower. They were in the $68.25 to $69.5 range but closed at $67.59, down 5.71%. The notes expanded over 3 points on a dollar-neutral basis, compared to a sell off of stock. The new convertible was quoted at about 100.25 bid, 100.75 offered versus the closing stock price of $67.59. There was high demand for the new paper, which was “oversubscribed multiple times,” during the pricing process, a market source said.

The Rule 144A deal priced Tuesday night at the rich end of talk to yield 1.375% with an initial conversion premium of 30%. Price talk was for a 1.375% to 1.875% yield with an initial conversion premium of 25% to 30%, according to a market source.

The good credit in the deal created demand, a syndicate source said.

Investors apparently liked the deal, a trader said, but they were “looking a little frothy” in terms of valuation after Wednesday’s move.

The Billerica, Mass.-based medical device company is owner of the proprietary Omnipod Insulin Management System. The system generates the majority of the company’s revenue, which outpaced expectations in the third quarter.

Insulet is preparing to take over international distribution and sales of the Omnipod system after the expiration of its global distribution agreement with Ypsomed Distribution AG in July 2018.

Arbor realty prices at the wide end

Arbor Realty priced $125 million of three-year convertible notes to yield 5.375% with an initial conversion premium of 10%. The 5.375% convertibles due 2020 were priced at the wide end of talk, a market source said. Talk ranged from 4.875% to 5.375% with an initial conversion premium of 10% to 15%.

Arbor stock traded in the $8.25 to $8.40 range before closing at $8.34, down 1.18%.

Sarepta upsizes

Sarepta priced $475 million of seven-year convertible notes after market close to yield 1.5% with an initial conversion premium of 40%. The deal priced on the tight end of talk, which placed the yield at 1.5% to 2% with an initial conversion premium of 35% to 40%.

The deal was an upsize of $100 million from the initial talk of $375 million. The greenshoe was also boosted to $95 million from the initial $75 million.

Sarepta shares dropped during trading on the heels of the convertible deal announcement Tuesday night. Share were down $3.41, or 6.1%, closing at $52.44 on Wednesday.

During marketing, market players were valuing the deal. Using a credit spread of 400 basis points over Libor and 42% vol., one trader got the deal a little more than a point cheap at the midpoint of talk.

While the convertible is seven-year paper, which is often seen as a detraction for investors; Sarepta has a decent market capitalization, and the deal will probably place well and trade fine, the trader said.

Cambridge, Mass.-based Sarepta is a therapeutics company focused on genetic medicines to treat muscular dystrophy and other rare neuromuscular diseases.

Sarepta President and CEO Douglas Ingram purchased about $2 million shares of Sarepta common stock from certain purchasers of the notes at $52.44 per share, the closing price on Wednesday, concurrent to the pricing.

Sarepta also entered into capped call transactions with initial purchasers of the notes and their affiliates. The strike price on capped call transactions is $104.88, which boosts the initial conversion premium to 100% from the issuer’s perspective.

Aegean Marine plummets on earnings report

Aegean Marine’s convertibles and stocks plummeted after the company announced anticipated net losses of $3.4 million to $4.4 million, or $0.09 to $0.11 per share, for the third quarter on Tuesday. Aegean’s 4% convertible note due 2018 fell 11 points to 87.5 during early morning trades on Wednesday.

Aegean stock was trading in the $3.65 to $3.68 range in the same time period. The stock climbed to $3.85 at market close, a decrease of 7.23%.

The international marine fuel logistics company cited lackluster demand and increased competition in the shipping industry, oil markets, and marine fuel industry for the earnings decline, in a press release.

The three recent hurricanes and a serious refinery fire contributed to Aegean’s losses in the third quarter, according to the release. Aegean plans to file its 10-Q and release a detailed report on third quarter earnings on Nov. 16.

GNC convert holders cringe at new note

GNC’s 1.5% convertible due 2020 continued to lose ground after the company formally announced its plan to offer new senior secured notes on Wednesday. The company will sell $500 million of the five-year notes, Prospect News reported.

The indicated area for the 1.5% convertible was 70, but it plummeted into the 58-59 range on Monday, a market source said. “Everyone’s worried the convertible is being layered over,” a market source said. “Who knows how much they have to pledge to their outstanding senior paper.”

GNC stock also fell during trading, closing at $5.98, a decrease of 5.08%.

This is not the first time the Pittsburgh-based specialty health and wellness retailer’s 1.5% convertible has traded low. Trading of the convertible dipped into the low 50s in February after the company reported significantly lower operating margins and S&P placed GNC’s corporate credit ratings on CreditWatch with negative implications.

Mentioned in this article:

NASDAQ: SRPT

NASDAQ: PODD

NYSE: ABR

NYSE: ANW

NYSE: GNC

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