Assurant convertible preferreds on tap; Western Digital, Nutanix reach new heights

Abigail W. Adams

Portland, Me., March 6 – The primary market was active on Tuesday with a new mandatory convertible preferred stock deal in the works.

Assurant Inc. plans to price $250 million, or 2.5 million shares, of three-year $100-par mandatory convertible preferred stock after the market close Wednesday.

Price talk is for a dividend of 6.25% to 6.75% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and Wells Fargo Securities, LLC are the joint bookrunners for the registered deal, which carries a greenshoe of $37.5 million, or 375,000 shares.

While the primary market prepares new paper, several recently priced deals reached new heights during Tuesday’s session.

Western Digital Corp.’s 1.5% convertible notes due 2024, Okta Inc.’s 0.25% convertible notes due 2023 and Nutanix Inc.’s 0% convertible notes due 2023 traded to their highest point on an outright basis since pricing.

Western Digital’s 1.5% notes expanded about 0.25 point to 0.5 point dollar neutral, a market source said.

While trading of the notes dominated the secondary space on Tuesday, they have been called “the scarcest billion-dollar issue seen in a long time,” a market source said.

Okta’s 0.25% convertible notes expanded about 0.25-point dollar neutral, a market source said.

Nutanix’s 0% convertible notes traded up to 113 on Tuesday after the San Jose, Calif.-based cloud computing software company’s stock broke out to a new 52-week high.

The 0% convertible notes, which priced on Jan. 18, were trading below par in late January.

Micron Technology Inc.’s 3% convertible notes due 2043 and Dermira Inc.’s 3% convertible notes due 2022 continued to be actively traded during Tuesday’s session. Micron’s 3% notes continued to climb outright alongside its stock but was little changed dollar neutral, a market source said.

Trading of Dermira’s 3% notes solidified around 80 on Tuesday after taking a more than 25-point tumble on an outright basis on Monday.

Ciena Corp.’s soon-to-mature 3.75% convertible notes climbed about 9 points on an outright basis as the company stock soared after the release of its first-quarter earnings reports prior to the market open Tuesday.

Western Digital hard to find

Western Digital’s 1.5% notes continued to dominate trading activity in the secondary space on Tuesday. The notes traded as high as 107 early in Tuesday’s session with stock up about 3.23%.

The 1.5% notes continued to see active trading in a range of 106 to 107 throughout the afternoon. Western Digital stock closed Tuesday at $93.80, an increase of 4.28%.

The notes, which move on a 50% delta, improved about 0.25 point to 0.5 point dollar neutral, a market source said.

On an outright basis, Tuesday’s trades were the highest for the notes since Western Digital priced the $1 billion offering on Jan. 31. The greenshoe for the deal was fully exercised lifting its total size to $1.1 billion.

While the 1.5% notes were among the most actively traded on Tuesday, they have been called “the scarcest billion-dollar issue seen in a long time,” a market source said. “For a deal that size, they’re tough to find.”

Okta trades up

Okta’s recently priced 0.25% convertible notes due 2023 also traded to their highest point on an outright basis since pricing on Feb. 22.

The notes traded up to 106 in scattered trading activity early in the session with the San Francisco-based enterprise identity provider’s stock up slightly.

Trading of the notes tempered as Okta’s stock price decreased. Okta stock closed Tuesday at $38.22, a decrease of 1.6%. The 0.25% notes were up about 0.25 point dollar neutral on Tuesday, a market source said.

Nutanix soars

Nutanix’s 0% convertible notes due 2023 also jumped to new heights on Tuesday as the company’s stock soared. The 0% notes were seen at 113 versus an equity price of $43.90 mid-afternoon.

The 0% convertible notes were well received on their market debut but dropped below par in late January after JPMorgan analysts downgraded the company and set a price target for stock of $35.

The 0% convertible notes have steadily climbed throughout February.

The 0% notes climbed about 3 points on an outright basis to trade at 113 on Tuesday.

Nutanix stock broke out on Tuesday and set a new 52-week high, closing the day at $44.13, an increase of 5%.

Nutanix unveiled its new hyper-converged infrastructure XC Core platform on Tuesday and announced rebates to partners that sell Nutanix software on the platform, CRN reported.

The rebates are part of Nutanix’s strategy to grow the company’s channel business as it transitions into software.

Nutanix’s transition to a more software-oriented model was the reason for the JPMorgan downgrade with analysts saying it could cause short-term business disruptions.

Micron, Dermira in focus

Micron’s 3% convertible notes due 2043 were actively traded on Tuesday. The equity-sensitive convertible notes climbed about 6 points outright as the semiconductor company’s stock continued to improve.

However, the notes were unchanged dollar neutral, a market source said.

The 3% notes traded in a range of 186 to 188 early on Tuesday. Micron’s stock closed Tuesday at $53.74, an increase of 3.29%.

Micron’s stock broke out on Monday setting a new 52-week high and trading above $50.00 for the first time since September 2000.

The 3% convertible notes are deep in the money and are probably being used as a source of funds, a market source said.

Dermira’s 3% convertible notes due 2022 also saw another day of active trading on Tuesday after nosediving on Monday. The 3% notes traded in a range of 80 to 81 after dropping about 25 points on an outright basis on Monday.

Dermira stock rebounded slightly and closed Tuesday at $9.50, an increase of 10.59%, after plummeting more than 65% on Monday.

Dermira announced on Monday that it was abandoning the development of an experimental topical acne treatment that was in late-stage clinical trials. The drug did not meet any of its endpoints in two separate phase 3 clinical trials.

Ciena’s earnings

Ciena’s 3.75% convertible notes due 2018 climbed about 9 points on an outright basis as its underlying equity soared. The 3.75% notes were seen trading at 131.85 versus an equity price of $25.28 mid-afternoon.

Ciena stock closed Tuesday at $25.71, an increase of 10.06%.

The Hanover, Md.-based supplier of telecommunications networking equipment released its first-quarter earnings report prior to the market open. Ciena reported revenue of $646.1 million, a year-over-year increase of 4%, for the first quarter.

Ciena reported a net loss of $3.20 per share for the first quarter primarily due to charges related to the Tax Cuts and Jobs Act, according to a company news release. Ciena reported non-GAAP earnings per share of 15 cents.

Mentioned in this article:

Assurant Inc. NYSE: AIZ

Ciena Corp. NYSE: CIEN

Dermira Inc. Nasdaq: DERM

Micron Technology Inc. Nasdaq: MU

Nutanix Inc. Nasdaq: NTNX

Okta Inc. Nasdaq: OKTA

Western Digital Corp. Nasdaq: WDC

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