NIO convertible offering eyed; Equinox notes hold par; Revance trades up on swap

By Abigail W. Adams

Portland, Me., Sept. 19 – The convertibles primary and secondary markets were active on Tuesday with a $1 billion offering set to price after the market close and an overnight offering making its aftermarket debut.

NIO Inc. has returned to the convertibles market with a $1 billion two-tranche offering of six- and seven-year convertible notes.

The tranches modeled ridiculously cheap and rightfully so with investors wary of China-domiciled companies in general and NIO’s outstanding convertible notes poor performers, sources said.

While market players eyed the new deal in the works, new paper from Equinox Gold Corp. made its aftermarket debut.

In an overnight bought deal, Equinox priced $150 million of five-year convertible notes after the market close on Monday.

The new paper held par in active trade as stock plunged on the heels of the offering.

Outside of the new paper, the secondary space was active as equities and Treasuries dipped on the eve of the Federal Open Market Committee’s Wednesday announcement.

The Dow Jones industrial average closed Tuesday down 107 points, or 0.31%, the S&P 500 index closed down 0.22%, the Nasdaq Composite index closed down 0.23% and the Russell 2000 index closed down 0.32%.

There was $415 million in reported volume in the late afternoon with topical news pushing Revance Therapeutics Inc.’s 1.75% convertibles due 2027 into the spotlight.

The notes sank outright but gained on hedge as stock dropped 20% in response to news presented at an investor’s day conference.

NIO in focus

NIO plans to price a $1 billion two-tranche offering of six- and seven-year convertible notes after the market close on Tuesday.

The offering consists of a $500 million tranche of six-year convertible notes with price talk for a coupon of 3.5% to 4% and an initial conversion premium of 27.5% to 32.5%.

The deal also includes a $500 million tranche of seven-year convertible notes with price talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 27.5% to 32.5%.

The six-year tranche was marketed with assumptions of 750 basis points over SOFR and a 45% vol.; the seven-year tranche was marketed with assumptions of 800 bps over SOFR and a 45% vol.

Using those assumptions, the six-year tranche looked 7 points to 7.75 points cheap and the seven-year tranche looked 9.5 points cheap at the midpoint of talk, sources said.

While the notes modeled extremely cheap compared to other recent deals, “they have to in order for people to care,” a source said.

“They’re valued cheaply and rightfully so,” another source said.

Investors are wary of China-domiciled companies in general given the country’s mounting economic woes.

Serial issuer NIO’s outstanding convertible notes have been disappointments with both issues heavily busted.

“There’s some hair on this,” a source said.

While busted, NIO’s outstanding 0% convertible notes due 2026 and 0.5% convertible notes due 2027 are trading with much tighter spreads than the tranches in the market and made large gains on Tuesday in anticipation of a company buyback.

The 0% convertible notes due 2026 gained 1.5 points to trade at 97.25 in the late afternoon with the yield 8%.

The 0.5% convertible notes due 2027 also gained 1.5 points to trade at 88.5 in the late afternoon with the yield about 9¼%.

There was also some interesting activity in NIO’s outstanding convertible notes on Monday with the notes well bid and market sources speculating there may be some negotiations with the company.

While debt repayment has been identified as a use of proceeds from the sale of the new notes, no privately negotiated transactions related to NIO’s outstanding notes was specified.

Equinox expands

In an overnight bought deal, Equinox Gold priced $150 million of five-year convertible notes after the market close on Monday at par with a coupon of 4.75% and an initial conversion premium of 20%.

The new paper was active on Tuesday and holding par as stock plunged on the heels of the offering.

The 4.75% notes were wrapped around par versus a stock price of $4.38 early in the session, according to a market source.

They continued to trade in the par to 100.5 context throughout the session.

While the notes saw a large expansion based on Monday’s closing price, the overnight deal came as a surprise with hedge players unable to get their hedges in at that level, a source said.

There was $10 million in reported volume.

Equinox’s stock traded to a low of $4.20 and a high of $4.51 before closing at $4.23, a decrease of 19.27%.

Revance up on swap

Revance’s 1.75% convertibles due 2027 were active with the notes falling outright but gaining on swap as stock plunged following the company’s investors day.

The 1.75% notes fell 8 points outright.

They traded at 80 versus a stock price of $11.48 in the late afternoon.

The notes expanded 1.5 to 2 points on swap, sources said.

Revance’s stock traded to a low of $11.10 and a high of $13.86 before closing at $13.81, a decrease of 17.31%.

Stock plunged after the biotech company focused on aesthetics announced a new pricing program for its Botox-competitor DAXXIFY.

The program slashed the price of DAXXIFY to make it more competitive with Botox; however, the price cuts are also expected to slash into the company’s anticipated sales revenue.

Mentioned in this article:

Equinox Gold Corp. NYSEAmerican: EQX

NIO Inc. NYSE: NIO

Revance Therapeutics Inc. Nasdaq: RVNC

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