New issue pipeline builds with deals from BioMarin, Blackstone, Radius; Tesla improves

By Stephanie N. Rotondo

Seattle, Aug. 7 – Trading in the convertible bond market was on the subdued side on Monday – with at least one exception – but activity could pick up as new issues start to flow into the space.

After Monday’s close, three new deals were added to the pipeline.

However, one market source saw fewer issues hitting the tape, as one was a re-opening of an existing issue.

“2.5 deals!” he said. “Awesome!”

BioMarin Pharmaceutical Inc. announced plans to sell $450 million of seven-year senior subordinated convertible notes via an underwritten offering.

Price talk is for a 0.5999% coupon and an initial conversion premium of 40%, according to a market source. The $1,000-par issue is also expected to price at 98.5% to 99% of par.

BofA Merrill Lynch, J.P. Morgan Securities LLC and Goldman Sachs & Co. are running the books.

The company plans to use a majority of the proceeds to take out its 0.75% convertible notes due 2018. That paper was quiet ahead of the announcement, though there were a couple of trades in the 1.5% convertible notes due 2020.

A source pegged the 1.5% convertibles with a 119 handle, which was about unchanged.

As for BioMarin’s stock, it was off 65 cents at $89.05 ahead of the deal’s announcement.

Blackstone Mortgage Trust Inc. meantime brought the “half” deal, a $100 million add-on to its 4.375% convertible notes due 2022.

A market source said the reopening was being marketed at par to 100.5, which compared to current markets in a 101.5 to 102 context.

Blackstone’s equity closed at $30.70, up 6 cents on the day.

The New York-based real estate investment trust originally sold $250 million of the 4.375% convertibles on May 2. Another $37.5 million was added via the exercise of the original over-allotment option on May 23, lifting total initial issuance to $287.5 million.

The bonds were sold at 99% of par in the initial offering. At that time, the initial conversion price of $35.67 a share represented an initial conversion premium of 15%.

Barclays is the bookrunner.

And, rounding out the day’s deals, Radius Health Inc. said it was selling $300 million of convertible senior notes due 2024.

Price talk is for a 2.75% to 3.25% yield and an initial conversion premium of 32.5% to 37.5%.

The offering will mark the company’s first foray into the convertible bond market.

Ahead of the announcement, Radius’ stock was seen ending off $1.33, or 3.18%, at $40.46.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the joint bookrunners.

The Waltham, Mass.-based biopharmaceutical company plans to use proceeds to support the U.S. commercial launch of TYMLOS (abaloparatide) injection and the development of life cycle management activities, such as the investigational abaloparatide transdermal patch, and to advance the development of pipeline product candidates, including a phase 2 clinical trial of elacestrant (RAD1901) in breast cancer and a phase 1 study of RAD140 in breast cancer, and for general corporate purposes.

Tesla takes over

As for actual trading, Tesla Inc.’s convertibles were popping in Monday trading, as it was reported the company intended to raise $1.5 billion via the issuance of new debt.

The company’s 1.25% convertible notes due 2021 were seen in a 116.5 to 117.5 context at the end of the day, down from the day’s high between 117 and 118. Still, that was better when compared to a 113.5 to 114 range at Friday’s close, according to a market source.

The 2.375% convertible notes due 2022 were meantime pegged at 127 to 128 versus previous levels around 123.

While the convertibles were moving upward, the underlying stock was slightly lower, falling $1.74 to $355.17.

As Palo Alto, Calif.-based Tesla looks to up its production rate to 500,000 cars per year, the market has been expecting that the cash-burning company will need to raise more capital. It was unclear how that might occur, though at the company’s recent quarterly conference call, Elon Musk, chief executive officer, said an equity raise was not in the offing.

Then, on Monday, Tesla announced its plan to sell $1.5 billion of senior notes due 2025.

Goldman Sachs & Co., Morgan Stanley & Co. LLC, Barclays, BofA Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBC Capital Markets LLC are reportedly running the debt deal.

Mentioned in this article:

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Blackstone Mortgage Trust Inc. NYSE: BXMT

Radius Health Inc. Nasdaq: RDUS

Tesla Inc. Nasdaq: TSLA

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