Morning Commentary: Jersey Industries, Deutsche Bank deals on tap; Red Hat active

By Abigail W. Adams

Portland, Me., April 18 – The flurry of trading activity surrounding Clovis Oncology Inc.’s recently priced 1.25% convertible notes due 2025 tempered early Wednesday with few bonds seen on the tape.

The 1.25% notes were seen trading just above par with stock down about 0.5% early in Wednesday’s session. They were moving largely in line dollar neutral, a market source said.

While trading activity surrounding Clovis’ new deal was slow early Wednesday, the primary market prepared two new offerings set to price after the market close.

Deutsche Bank AG, London Branch plans to price $250 million of five-year cash-settled equity-linked notes tied to JPMorgan Chase & Co. after the market close on Wednesday at an issue price of 105.

Price talk is for a fixed coupon of 1% and a threshold premium of 13% to 16%, according to a market source. The initial price will be the volume weighted average price of JPMorgan stock on the day after pricing.

The offering is Deutsche Bank’s second offering of cash-settled equity-linked notes. Deutsche Bank priced $300 million of 1% cash-settled equity-linked notes due 2023 tied to Voya Financial Inc. stock in early March.

JPMorgan Chase Financial Co. LLC and BofA Finance LLC also recently priced offerings of five-year cash-settled equity-linked notes tied to Voya. The deals were an effort to monetize their Voya warrants, market sources said.

South Jersey Industries, Inc. plans to price $250 million of three-year mandatorily convertible equity units after the market close on Wednesday with price talk for a yield of 7% to 7.5% and a threshold appreciation range of 17.5% to 22.5%.

The offering will be made up of 5 million units with a par value of $50 with each unit consisting of a contract to purchase shares of common stock and a 5% beneficial ownership interest in the company’s par of $1,000 series A junior subordinated notes due 2031.

Concurrently with the mandatory convertible equity units, South Jersey Industries is pricing $325 million shares of common stock, a portion of which may be subject to a forward sale agreement the company expects to enter into.

Lam Research Corp.’s convertible notes were active on the tape early Wednesday with the notes down on an outright basis alongside company stock.

Lam Research’s 2.625% convertible notes due 2041 dropped about 30 points outright to trade at 600. Lam Research’s 1.25% notes due May 15, 2018 dropped about 10 points outright to trade at 333.

The 1.25% notes are in the averaging period prior to maturity.

Lam Research stock was down to $203.00, a decrease of 4.38%, early in Wednesday’s session.

Lam Research reported third-quarter earnings after the market close on Tuesday. Lam reported revenue of $2.89 billion and non-GAAP earnings per share of $4.79 in the third quarter, which beat analyst expectations.

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