Helix, Supernus convertibles on tap; Deutsche Bank eyed; new paper, tech names active

By Abigail W. Adams

Portland, Me., March 13 – Trading volume in the convertibles space remained light on Tuesday, which sources attributed to the shortage of new paper as opposed to the latest winter storm.

“It’s been very, very quiet,” a New York-based market source said early in the session. “Everyone made it in. But there are no new deals.”

That will soon change with one new deal expected to price Tuesday evening and another set to price after the market close Wednesday.

Helix Energy Solutions Group, Inc. plans to price $125 million of 5.5-year convertible notes Tuesday evening with price talk for a coupon of 3.625% to 4.125% and an initial conversion premium of 45% to 50%, according to a market source.

Supernus Pharmaceuticals, Inc. plans to price $350 million of five-year convertible notes after the market close Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Jeffries & Co., J.P. Morgan Securities LLC and Cowen Group are the bookrunners for the Rule 144A deal, which carries a greenshoe of $52.5 million.

Guidewire Software Inc.’s recently priced 1.25% convertible notes due 2025 and Etsy Inc.’s recently priced 0% convertible notes due 2023 continued to be among the top names traded on Tuesday.

However, Deutsche Bank AG, London Branch’s 1% cash-settled equity-linked notes due 2023 joined them at the top of the list. The notes jumped about 2 points outright in active trading after the notes received an investment-grade rating.

While all three deals made their market debut on March 9, Deutsche Bank’s 1% notes were initially slow to trade.

Equity sensitive tech names were also active on the tape on Tuesday.

Micron Technology Inc.’s 3% convertible notes due 2043 were volatile alongside their underlying equity with trades as low as 203 and as high as 215 during Tuesday’s session.

Microchip Technology Inc.’s 1.625% convertible notes due 2025 were also active with trades as low as 188 and as high as 197 as its underlying equity also fluctuated.

While deep-in-the-money convertible notes were not much changed dollar neutral, they are looking better to buy, and hedge funds are moving in.

“Hedge funds are buying and setting up for the pullback,” a market source said. “They stand to make some money.”

Helix on tap

Two new deals were announced after the market close Tuesday with one expected to price later in the evening.

Helix Energy Solutions plans to price $125 million of convertible notes due Sept. 15, 2023 Tuesday evening. Price talk is for a coupon of 3.625% to 4.125% and an initial conversion premium of 45% to 50%.

Wells Fargo Securities LLC and BofA Merrill Lynch are the bookrunners for the registered deal.

The new offering from Helix will be used to repurchase the outstanding $60,115,000 of the company’s 3.25% convertible notes due 2032 and to repay borrowings under its term loans.

Helix announced a put option on the 3.25% notes on Feb. 14, which expires on March 15, Prospect News reported. If the put option is not exercised, Helix may call the remaining amount, according to a company news release.

The 3.25% notes were last seen trading in the 98 to 99 range in late February.

Deutsche Bank dominates

While slow to trade on their market debut March 9, Deutsche Bank’s 1% cash-settled notes linked to Voya Financial stock were one of the most actively traded during Tuesday’s session. The 1% notes traded as high as 104 on Tuesday, a market source said.

They were seen trading at 103.37 versus an equity price of $54.28 about one hour before the market close. The notes recently got an investment-grade rating, a market source said.

While the threshold premium on the notes is 30%, the threshold and initial price will not be determined until after a five-day averaging period, which ends on Thursday.

While Deutsche Bank’s 1% convertible notes climbed about 2 points outright, JPMorgan Chase Financial Co. LLC’s 0.25% cash-settled notes linked to Voya Financial was trading just north of par during Tuesday’s session.

Recent deals

Guidewire’s 1.25% convertible notes and Etsy’s 0% convertible notes continued to see active trading their third day in the market.

Guidewire’s 1.25% notes were seen up another 0.25 point dollar neutral. The notes traded up to 103 with the stock up to $89.70 but settled around 101.25 to 102 as stock decreased.

“With the coupon and the market cap, people like it,” a market source said. Guidewire’s 1.25% notes were attracting European investors, the source said.

Etsy’s 0% convertible notes also continued to be among the top traded on Tuesday. The notes were seen trading between 103.5 and 104 with equity around $27.88, a market source said. Etsy was priced at 99.

Tech names active

While trading volume was light on Tuesday and recently priced deals remained in focus, equity sensitive tech names were also active on the tape.

Micron’s 3% notes were volatile alongside their stock. The notes jumped about 10 points outright to trade at 214 versus an equity price of $62.66, an increase of about 5.5%, early in the session.

Micron’s 3% notes dropped a short time later to 205 as its equity also dropped to $59.90, an increase of less than 1%.

The notes ended Tuesday’s session at 215.863, according to Trace data. Micron stock closed Tuesday at $59.43, an increase of 0.1%.

Microchip Technology’s 1.625% convertible notes due 2025 were also active and fluctuating alongside its stock.

The notes traded to a low of 188 and a high of 197 before closing the day at 191.5, according to Trace data. Microchip stock closed Tuesday at $98.03, a decrease of 2.2%.

Mentioned in this article:

Etsy Inc. Nasdaq: ETSY

Guidewire Software Inc. NYSE: GWRE

Helix Energy Solutions Group, Inc. NYSE: HLX

Microchip Technology Inc. Nasdaq: MCHP

Micron Technology Inc. Nasdaq: MU

Supernus Pharmaceuticals, Inc. Nasdaq: SUPN

Voya Financial, Inc. NYSE: VOYA

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