Green Plains, YY on tap; Tesla breaks par; JPMorgan Voya-linked notes, Illumina active

By Abigail W. Adams

Portland, Me., June 18 – The convertible primary market leapt into action on Tuesday with issuers stepping forward with equities skyrocketing as the Federal Reserve convened.

The forward calendar filled in with Green Plains Inc. launching an overnight deal and YY Inc. marketing an $850 million two-tranche convertible notes offering.

There was also an uptick in trading activity in the secondary space with equities soaring as statements by the chairman of the European Central Bank about rate cuts helped fan the flames of optimism that the Federal Reserve would follow suit.

There was about $112 million in reported volume on the tape about one hour into Tuesday’s session and $485 million on the tape into the afternoon, sources said.

The market, in general, saw about a 0.25 point expansion, sources said.

However, with uncertainty surrounding the Federal Reserve’s pending decision regarding rates, which will be announced on Wednesday, people were most likely taking advantage of the market conditions to trim their positions, a source said.

Tesla Inc.’s recently priced 2% convertible notes due 2024 were among the most actively traded issues in the secondary space.

The notes continued to rally on Tuesday, breaking par in intraday trading after sinking as low as 88 a little over one week ago.

Illumina Inc.’s 0.5% convertible notes due 2021 were also among the volume movers of Tuesday’s session with the notes improving dollar-neutral as stock wavered between gains and losses.

JPMorgan Chase Financial Co. LLC’s 0.25% cash-settled equity-linked notes due 2023 tied to Voya Financial, Inc. again saw a large amount of reported volume with a couple of large block trades on the tape.

However, whether the rally will continue on Wednesday in the wake of the Federal Reserve’s announcement “is the million-dollar question,” a market source said.

New deals

The forward calendar filled in on Tuesday with issuers stepping forward to take advantage of the rally in equities.

YY plans to price an $850 million two-tranche offering of convertible notes after the market close on Wednesday, according to a market source.

The offering consists of a $425 million tranche of six-year convertible notes with price talk for a yield of 0.25% to 0.75% and an initial conversion premium of 35% to 40%.

The offering will also feature a $425 million tranche of seven-year convertible notes with price talk for a coupon of 0.875% to 1.375% and an initial conversion premium of 35% to 40%.

Each tranche carries a greenshoe of $75 million.

Goldman Sachs & Co. LLC and Credit Suisse Securities (USA) LLC are bookrunners for the Rule 144A and Regulation S offering from the Guangzhou, China-based global social media platform.

In an overnight deal, Green Plains plans to price $100 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 25% to 30%, according to a market source.

Jefferies & Co. and BMO Capital Markets are bookrunners for the Rule 144A offering, which carries a greenshoe of $20 million.

Proceeds will be used to refinance $56.8 million of the company’s 3.25% convertible notes due 2019 and repurchase up to $40 million in common stock.

Tesla breaks par

Tesla’s recently priced 2% convertible notes due 2024 continued to improve on an outright and dollar-neutral basis on Tuesday.

The 2% convertible notes broke par during intraday trading with stock up more than $6.

However, the notes came in alongside stock as the session progressed.

They closed the day around 98.5.

However, they were improved about 0.25 point dollar-neutral, a market source said.

Tesla stock traded as high as $234.74 but closed the day largely flat at $224.74, a decrease of 0.13%.

Tesla stock surged more than 4% on Monday, which many attributed to CEO Elon Musk’s weekend announcement that he was deleting his twitter account.

SolarCity Corp.’s 1.625% convertible notes due Nov. 1, 2019 were also improved on Tuesday, an indication of returning investor confidence.

The 1.625% convertible notes gained about 0.625 point outright to trade up to 96.875. The yield on the notes was still significant at 10.5%, a source said.

The soon-to-mature convertible notes traded as low as 92 in late May.

Illumina improves

Illumina’s 0.5% convertible notes due 2021 continued to improve in active trading on Tuesday.

The notes gained about 2 points outright to trade just shy of 150.

They expanded about 0.25 point dollar-neutral, a market source said.

Illumina stock wavered between gains and losses on Tuesday after jumping more than 2% on Monday.

Stock traded as high as $354.09 before closing the day at $347.85, a decrease of 0.93%.

While the overall market was strong on Tuesday, Illumina’s stock was backing off the heights reached on Monday after announcing it had won its patent infringement suit against Ariosa Diagnostics.

Rebalancing

JPMorgan’s 0.25% equity-linked notes tied to Voya Financial again saw high-volume activity on Tuesday.

While there was more than $13 million in reported volume on the tape, there were few trades with most coming in large blocks – two of which were $5 million plus and another which was a $2 million trade.

The notes were changing hands at 101.25, according to a market source.

Voya stock closed Tuesday at $54.28, an increase of 1.06%.

The trading activity was most likely the result of someone rebalancing their portfolio, a market source said.

Mentioned in this article:

Green Plains Inc. Nasdaq: GPRE

Illumina Inc. Nasdaq: ILMN

Tesla Inc. Nasdaq: TSLA

Voya Financial, Inc. NYSE: VOYA

YY Inc. Nasdaq: YY

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