Prospect Capital slips ahead of earnings; II-VI deal on deck; Innoviva’s recent 2.5% notes firm

By Stephanie N. Rotondo

Seattle, Aug. 23 – While convertible bond market trading remained thin on Wednesday, investors were looking ahead.

As such, Prospect Capital Corp.’s 4.95% convertible notes due 2022 were in play, falling nearly a point to 98.75, according to a market source.

Another source placed the issue in a 98.625 to 99 range, which compared to previous trades around 99.5.

The underlying stock was initially weaker but eventually finished the session 3 cents higher at $7.31.

The New York-based business development company is scheduled to release its latest quarterly results on Monday. Investors are predicting that the company will slash its common stock dividend as net investment income has not been enough to cover those payments for the last three quarters.

The market was also looking for II-VI Co. to price its previously announced $300 million Rule 144 offering of convertible senior notes.

The deal was announced late Tuesday, with pricing expected after Wednesday’s close.

However terms were not seen as of 6 p.m. ET.

Ahead of pricing, the company’s equity was trading off 25 cents at $35.25.

Price talk is for a 0.25% to 0.75% yield and an initial conversion premium of 30% to 35%, a market source reported.

BofA Merrill Lynch is the bookrunner.

The notes will be convertible into cash, common stock or a combination of the two, at the company’s option.

The Pittsburgh-based producer of engineered materials and optoelectronic components and devices plans to use $50 million of the proceeds to repurchase stock from one or more of the initial purchasers of the notes via privately negotiated transactions.

Remaining proceeds will be used for general corporate purposes.

Meanwhile, Innoviva Inc.’s 2.5% convertible notes due 2025 were on the rise, finishing the day at 97.875 bid, 98 offered.

That compared to previous trades either side of 97, a source said.

Earlier in the day, the bonds were seen having added about ½ point to trade at 98.165, a source said.

The company’s shares were up 22 cents, or 1.75%, at mid-morning, but closed the day off a penny at $12.57.

On Monday, the Brisbane, Calif.-based biopharmaceutical company said it had successfully wrapped a refinancing of its 9% fixed-rate term notes due 2029. Innoviva was able to do so by securing a new $250 million term loan B, as well as selling $192.5 million of the 2.5% convertibles.

The company initially priced $175 million of the notes on Aug. 2, with an initial conversion premium of 30%. On Aug. 7, it was announced that a $17.5 million greenshoe had been fully exercised, bringing the total amount outstanding to $192.5 million.

Mentioned in this article:

II-VI Co. Nasdaq: IIVI

Innoviva Inc. Nasdaq: INVA

Prospect Capital Corp. Nasdaq: PSEC

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