Granite Point talks new deal; Cleveland-Cliffs tops par; pharmaceutical names eyed

By Abigail W. Adams

Portland, Me., Dec. 6 – Granite Point Mortgage Trust Inc. plans to price $125 million of five-year convertible notes before the market open on Thursday.

Price talk is for a coupon of 5.375% to 5.625% and a fixed conversion price of $20.00, according to a market source. Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, and BofA Merrill Lynch are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $18.75 million.

The notes are a private placement under Rule 144A for institutional investors, according to a company news release.

The first new paper of the month hit the secondary market on Wednesday with Cleveland-Cliffs Inc.’s newly priced 1.5% convertible notes due 2025 solidifying around 100.5 in active trading throughout the session.

With a coupon of 1.5% and an initial conversion premium of 35%, the new paper priced Tuesday evening richer than coupon talk and at the midpoint of talk for the initial conversion premium.

Price talk had been for a coupon of 1.625% to 2.25% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

With the shortage of new paper in the convertibles space, it is an issuer’s market, a market source said.

Pharmaceutical companies were in focus on Wednesday with convertible notes from Teva Pharmaceutical Finance Co. LLC, Depomed Inc. and Sucampo Pharmaceuticals Inc. active.

While Teva’s 0.25% convertible notes due 2026 and Depomed’s 2.5% convertible notes due 2021 actively swapped hands, there was little movement in trading prices.

However, Sucampo’s 3.25% convertible notes due 2021 gained about 4 points throughout the session.

Iron hot

Cleveland-Cliffs’ newly priced 1.5% convertible notes dominated trading in the secondary market on Wednesday. The notes were swapping hands as soon as the bell rang and did not stop until the final whistle.

Traders pegged the notes between 100.5 and 101 shortly after the opening bell. The notes hovered just below 101 throughout the session and ended just above par at 100.5, according to a market source.

Cleveland-Cliffs stock was also up, ending the day at $6.10, an increase of 0.16%.

BofA Merrill Lynch, Goldman Sachs, Credit Suisse, Deutsche Bank Securities Inc. and Jefferies LLC were the joint bookrunners for the registered deal, which carries a greenshoe of $41.25 million.

The notes were offered concurrently with an offering of $400 million in secured notes due 2024, which also priced Tuesday night.

Cleveland-Cliffs priced the $400 million issue of 4 7/8% six-year senior secured notes (Ba3/BB-) at 99.347 to yield 5% on Tuesday.

The yield printed at the wide end of the 4¾% to 5% yield talk. Initial guidance was in the high 4% to low 5% area.

Proceeds will largely be used to finance the development of the iron ore mining company’s first hot briquetted iron production plant in Toledo, Ohio.

Pharma in focus

Pharmaceutical companies were active during Wednesday’s session although Teva and Depomed were mostly moving sideways. Both pharmaceutical companies recently announced major restructurings of their organizations.

Depomed’s 2.5% convertible notes were heavily traded and made some gains on Tuesday after the company announced it was slashing its staff by 40%, offloading sales of its flagship product Nucynta to Collegium Pharmaceutical Inc. and moving its headquarters.

The notes gained about 5 points in active trading on Tuesday after the announcement. While still active, trading tempered on Wednesday with the notes remaining in the 83 range.

The notes ended the day at 83.75, according to Trace data. Depomed stock ended the day at $8.11, an increase of 3.18%. Prior to the announcement, Depomed’s 2.5% convertible notes were trading in the low to mid 70s.

Teva’s 0.25% convertible notes were also actively traded throughout the session with almost 100 trades in small volume by dollar amounts, according to Trace data. The majority of the trades were flush at 85.55.

Teva also announced a major restructuring on Nov. 27 after a long struggle with declining revenue and large debt.

Teva plans to combine its generic and specialty medicine global units into a single commercial organization. Research and development will also be melded into a single global group responsible for both generic and specialty medications.

While the notes have been active since the announcement, there has been little fluctuation in trading price. Teva stock, however, saw a significant decline on Wednesday, ending the day at $14.32, a decrease of 4.91%.

Sucampo was the exception to the sideways momentum of the convertible notes from other drug makers. Sucampo’s 3.25% convertible notes gained 4 points to trade at 117 by late afternoon, according to a market source.

Sucampo stock ended the day at $14.95, an increase of 5.28%.

The biopharmaceutical company’s stock has traded at high volume throughout the week gaining 5.08% on Monday and another 5.58% on Tuesday. B. Riley analysts recently bumped up the price target for Sucampo stock to $18.00 from $14.00.

Sucampo is working to break into the market for rare diseases.

Mentioned in this article:

Cleveland-Cliffs Inc. NYSE: CLF

Depomed Inc. Nasdaq: DEPO

Granite Point Mortgage Trust Inc. NYSE: GPMT

Sucampo Pharmaceuticals Inc. Nasdaq: SCMP

Teva Pharmaceutical Industries Ltd. NYSE: TEVA

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