Ascendis, Blackstone Mortgage convertible offerings eyed; Western Digital, Airbnb active

By Abigail W. Adams

Portland, Me., March 24 – The convertibles primary market returned to action after a more than week hiatus with two offerings on deck.

Ascendis Pharma A/S plans to price $500 million of six-year convertible notes and Blackstone Mortgage Trust Inc. plans to price $300 million of five-year convertible notes after the market close on Thursday.

Ascendis’ deal looked cheap based on underwriters’ assumptions; however, it was heard to be wall-crossed, sources said.

Blackstone Mortgage’s offering modeled out to fair value based on underwriters’ assumptions with the yield on the common stock diminishing the attractiveness of the convertibles offering.

Meanwhile, there was an uptick of activity in the secondary space with equities again on the rise in what has been a see-saw week.

The Dow Jones industrial average closed the day up 350 points, or 1.02%, the S&P 500 index closed the day up 1.43%, the Nasdaq Composite closed the day up 1.93% and the Russell 2000 index closed the day up 1.13%.

There was $80 million on the tape about one hour into the session and $450 million in reported volume about one hour before the market close.

Western Digital Corp.’s 1.5% convertible notes due 2024 again saw heavy volume during Thursday’s session although with little change in price.

Airbnb Inc.’s 0% convertible notes due 2026 improved on an outright basis in active trading although the notes were largely moving in line dollar-neutral.

Ascendis wall-crossed

Ascendis Pharma plans to price $500 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 2% to 2.5% and an initial conversion premium of 37.5% to 42.5%.

The deal was heard to be in the market with assumptions of 450 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked 2 points to 2.3 points cheap at the midpoint of talk, sources said.

However, the offering was heard to be wall-crossed.

The deal was coming as a “happy meal” with proceeds to be used to repurchase up to 1 million of the company’s American Depositary Shares in privately negotiated transactions.

Blackstone fair

Blackstone Mortgage Trust plans to price $300 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 4.75% to 5.25% and an initial conversion premium of 15% to 20%.

The deal was heard to be in the market with assumptions of 400 bps over Libor and a 20% vol., according to a market source.

Using those assumptions, the deal looked 0.125 point rich to fair value at the midpoint of talk, sources said.

While the convertible notes carry dividend protection above 62 cents a quarter, the large yield on the common stock reduced the attractiveness of the offering, a source said.

The real estate finance company’s stock carries a dividend of 7.76%.

Western Digital active

Western Digital’s 1.5% convertible notes due 2024 again saw heavy volume on Thursday although with little movement in price.

While there were some odd lot prints above 97, the 1.5% convertible notes were largely trading on a 96-handle with large prints of $5 million plus between 96.5 and 96.625 for a yield of 3.5% to 3.75%, respectively, according to a market source.

There was $15 million in reported volume.

The 1.5% notes carry a large premium and mostly trade for their yield.

“It’s a cash alternative trade,” a source said.

While the convertible notes are not equity sensitive, Western Digital put in a strong performance on Thursday.

Stock closed the day at $50.44, an increase of 3.61%.

While stock dipped with the overall market on Wednesday, it has performed well since news broke on Tuesday the data storage manufacturer was jointly building a new flash memory fabrication facility with Kioxia Holdings Corp. in northern Japan.

Airbnb gains

Airbnb’s 0% convertible notes due 2026 were also on the rise in active trading on Thursday.

The 0% convertible notes rose about 1 point outright to trade at 97.5 in the late afternoon, according to a market source.

They were largely moving in line on a dollar-neutral basis.

There was $12.5 million in reported volume.

Airbnb’s stock traded to a low of $162.67 and a high of $171 before closing the day at $170.83, an increase of 4.06%.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

Ascendis Pharma A/S Nasdaq: ASND

Blackstone Mortgage Trust Inc. NYSE: BXMT

Western Digital Corp. Nasdaq: WDC

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