Atlassian convertibles eyed post-earnings; Elanco gains continue; Luckin Coffee drops

By Abigail W. Adams

Portland, Me., Jan. 24 – The convertible secondary space remained active on Friday despite a heavy tape.

While the market was generally soft with the downturn in equities and widening of credit markets, there were still some areas of firmness, sources said.

Elanco Animal Health Inc.’s 5% tangible equity units remained active with the units continuing to gain on a dollar-neutral basis.

Atlassian Inc.’s 0.625% convertible notes due 2023 surged alongside stock after the enterprise software company reported second-quarter earnings.

However, Luckin Coffee Inc.’s 0.75% convertible notes due 2025 ended their meteoric rise and tumbled toward par as fear of the spreading coronavirus dragged down markets.

While volume in the sector was light, several mining names were looking better to buy, a market source said.

SSR Mining Inc.’s 2.875% convertible notes due 2033 saw some activity in the secondary space with the notes up slightly as their put date approaches.

While the convertible secondary space has had a strong start to the year, a pullback is to be expected as market players prepare for the wave of new deal activity anticipated after the earnings blackout period comes to an end.

Elanco gains continue

Elanco Animal Health’s 5% tangible equity units remained active with the units continuing to gain on a dollar-neutral basis.

Following a 5.5-point expansion on Thursday, the units were changing hands at $55.50 early in the session with stock off more than 2%.

The units lost some steam as the session progressed and were changing hands at $55.25 in the late afternoon.

Elanco stock traded as low as $31.42 and as high as $32.56 before closing the day at $31.57, a decrease of 2.11%.

The drop in stock comes as the Greenfield, Ind.-based global animal health company prepares to arrange $5.1 billion of bank debt to help fund the acquisition of Bayer Animal Health.

The debt will include a $750 million revolver, a $575 million term loan A, a $2,425,000,000 term loan B and $1,355,000,000 of other secured debt, Prospect News reported.

Elanco priced $550 million in tangible equity units and a $726 million secondary offering on Wednesday with proceeds to also be used for the acquisition.

Elanco’s acquisition of Bayer Animal Health, which was announced in August 2019, is valued at $7.6 billion.

Atlassian active

Atlassian’s 0.625% convertible notes due 2023 surged alongside stock after the enterprise software company reported second-quarter earnings.

The 0.625% notes jumped 15 points outright with stock up more than 10% early in the session, a market source said.

While the notes traded as high as 187 shortly after the opening bell, they came in alongside stock as the session progressed.

They were seen changing hands at 183.75 versus a stock price of $143.92 in the late afternoon.

The bonds saw more than $17 million in reported volume during Friday’s session.

Atlassian stock traded as high as $150.71 and as low as $145.00 before closing the day at $146.79, an increase of 10.67%.

Stock surged following a top and bottom line earnings beat.

Atlassian reported second-quarter earnings per share of 49 cents versus analyst expectations of earnings per share of 27 cents.

Revenue was $408.7 million versus analyst expectations for revenue of $389 million.

Luckin tumbles

Following a meteoric rise in the secondary space, Luckin Coffee’s 0.75% convertible notes due 2025 tumbled toward par on Friday.

The 0.75% convertible notes due 2025 traded as low as 100.5 during Friday’s session with stock down as much as 10% in intraday trading.

However, the notes rebounded from their lows and were changing hands north of 101 heading into the market close, a market source said.

The notes continued to dominate activity in the secondary space with more than $26 million in reported volume.

Luckin’s ADS also nosedived on Friday.

The Beijing-based coffee shop chain’s equity traded as low as $43.91 and as high as $44.00 before closing the day at $40.83, a decrease of 8.6%.

The notes were coming in after a phenomenal run which saw them trade as high as 115 and expand upwards of 7 points dollar-neutral since pricing on Jan. 9.

SSR Mining eyed

SSR Mining’s 2.875% convertible notes due 2033 saw some activity in the secondary space with the notes gaining as their put date approaches.

The 2.875% notes were up about ¾ point outright. They were changing hands at about 101.75 versus an equity price of $18.42, according to a market source.

The notes saw more than $5 million in reported volume.

SSR Mining announced in December that holders of the notes will have the ability to exercise a put option on Feb. 1 and require the company to repurchase the notes at par plus accrued interest.

Holders have until Jan. 31 to surrender the notes for repurchase.

There are approximately $115 million of the notes outstanding, according to a company news release.

Mentioned in this article:

Atlassian Inc. Nasdaq: TEAM

Elanco Animal Health Inc. NYSE: ELAN

Luckin Coffee Inc. Nasdaq: LK

SSR Mining Inc. Nasdaq: SSRM

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