Harmonic’s new $105 million convertible expands on swap; Apellis, BEST, Heska on tap

By Rebecca Melvin

New York, Sept. 11 – Harmonic Inc.’s newly priced 2% convertibles traded up outright and on swap on Wednesday after the San Jose, Calif.-based video products company priced $105 million of the five-year notes in an overnight, “over-the-wall” deal, according to a market source.

The notes were quoted at 102.875 bid, 103.875 offered at the market close, with the stock at $6.74. The bonds were also quoted at 102 bid, 103 offered versus the closing stock price on Tuesday of $6.66. They were 102 bid, 103 offered at the open, the source said.

Over the wall refers to the way the deal was structured and allocated as the company was concurrently repurchasing some its older convertibles from investors.

Also in the primary market, there were a trio of smallish deals announced after the market close.

Apellis Pharmaceuticals Inc. is bringing a $200 million deal of seven-year convertibles, which was being talked to yield 3% to 3.5% with an initial conversion premium of 25% to 30%. BEST Inc. launched a $175 million offering of five-year convertible notes to yield 1.25% to 1.75% with an initial conversion premium of 30% to 35%. And Heska Corp. was talking a $75 million offering of seven-year convertible notes to yield 3.25% to 3.75% with an initial conversion premium of 35% to 40%.

The Apellis deal was expected to price overnight.

The Crestwood, Ky.-based biopharmaceutical company’s notes were being sold via J.P. Morgan Securities LLC and Citigroup Global Markets Inc. as active bookrunners of the Rule 144A deal.

Both BEST and Heska were expected to price after the market close on Thursday.

Goldman Sachs & Co. LLC, Credit Suisse Securities (USA) LLC and JPMorgan are bookrunners of BEST’s Rule 144A and Regulation S offering.

The proceeds will be used to pay the cost of capped call transactions and for general corporate purposes.

The company operates supply chain services in the People’s Republic of China.

JPMorgan and Piper Jaffray & Co. are the initial purchasers of the Rule 144A Heska notes.

The proceeds of the notes for the veterinary diagnostic and specialty health care products company will be used to repay all outstanding indebtedness of $12.75 million under its existing credit facility, to fully fund a $2 million cash collateral account contemplated to secure its obligations under its credit facility as amended in connection with the offering, to fund its intended expansion efforts, including through acquisitions of complementary businesses or technologies or other strategic transactions, and for working capital and other general corporate purposes.

The deals followed a short period of indigestion that the market suffered last week when about $4 billion in notes were priced. They were also coming ahead of the upcoming earnings blackout period that is expected to start Sept. 15 to Sept. 16 for many convertible issuers and with other companies starting blackout on Sept. 30, a New York-based market source said.

“We’re going to see deal volume slowing down, given earnings blackouts. But, personally, I think it’s good as investors are getting a break after the momentary indigestion last Thursday,” the source said.

Back in secondary market action, Booking Holdings Inc. was a notable trader. The Booking 0.9% notes due 2021 moved up a point outright to about 119 with shares of the company up $33.74, or 1.7%, to $2,052.50.

Wayfair Inc.’s convertibles gained in active trade with the 1% Wayfair notes due 2026 up nearly 3 points to 110.86 with the underlying shares jumping $7.18, or 5.8%, to $130.98.

Harmonic adds on swap

The new Harmonic notes were 101 bid, 102 offered in the gray market ahead of the market open on Wednesday after the deal priced with a stock reference price of $6.66.

Barclays was bookrunner for the transaction.

The company will use about $82.5 million of proceeds to repurchase a portion of the company’s outstanding 4% convertible notes due 2020.

The older Harmonic, its 4% notes due 2020, was in trade at 135.94.

The stock was up a bit on Wednesday. But the last mark was 102-103 on a dollar-neutral basis, versus the $6.66 stock price on Tuesday.

Mentioned in this article:

Apellis Pharmaceuticals Inc. Nasdaq: APLS

BEST Inc. Nasdaq: ADS: BEST

Brooking Holdings Inc. Nasdaq: BKNG

Harmonic Inc. Nasdaq: HLIT

Heska Corp. Nasdaq: HSKA

Wayfair Inc. NYSE: W

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