Arbor prices upsized $230 million deal; Cytokinetics, Sierra Oncology offerings on tap

By Rebecca Melvin

New York, Nov. 6 – Arbor Realty Trust Inc. announced that it priced an upsized $230 million of 4.75% three-year convertible notes after the market close on Wednesday. Ahead of pricing, market players were sizing up the deal, which had been unveiled ahead of the open as a $215 million size transaction.

The paper was looking pretty cheap using a credit spread of 300 basis points over Libor and 16% vol. at price talk of 4.75% coupon and 15% premium.

The deal looked to be worth 102.33 in that model, a New York-based market source said.

The Arbor Realty Trust notes were talked with a 4.5% to 4.75% coupon and a 15% initial conversion premium, according to a second source.

The Arbor deal is a shortish piece of paper and this will be its fifth convertible, the source noted.

The new Arbor Realty issue is being based on a volume weighted average stock price going forward and is being priced concurrently with an exchange of existing notes for cash and shares.

The Rule 144A notes have a $34 million greenshoe and were sold via bookrunners J.P. Morgan Securities LLC and JMP Securities LLC.

Also after the market close, two drug companies announced offerings. South San Francisco, Calif.-based Cytokinetics Inc. said it plans to price $100 million of convertible senior notes due 2026.

The notes were being talked with a 3.5% to 4% coupon and a 27.5% to 32.5% initial conversion premium.

Morgan Stanley & Co. LLC and Mizuho Securities USA Inc. are joint bookrunners and JMP Securities is acting as lead manager of the Securities and Exchange Commission-registered deal.

The proceeds of the offering are earmarked to fund drug development and for working capital and other general corporate purposes, including tenant improvement of a new facility. In addition, Cytokinetics plans to use a portion of the proceeds to pay the cost of a capped call transaction.

In connection with the pricing of the notes, the company plans to enter into a privately negotiated capped call transaction, which involves the counterparty purchasing shares to establish an initial hedge.

In addition, Vancouver, B.C.-based drug company Sierra Oncology Inc. announced plans to sell series A convertible preferred stock, together with series A and B warrants.

The company’s common stock plunged 25% in after-hours trade when the deal announcement was made.

The proceeds will be used to fund the company’s planned Phase 3 clinical trial of momelotinib and for general corporate purposes.

Jefferies LLC is acting as the bookrunning manager for the offering.

Among mandatory convertibles trading in the secondary market on Wednesday, DTE Energy Co.’s 6.25% convertible preferred was the most active issue, a New York-based trader said.

The $1.15 billion DTE issue is the most recently priced mandatory, having priced Oct. 29 along with $302 million of common stock.

Arbor Realty prices

Concurrently with the pricing of the Arbor Realty notes, the company plans to enter into separate privately negotiated agreements with certain holders of its outstanding $115 million of 5.25% convertible senior notes due 2021, which were issued on July 3, 2018, and its $149.5 million of 5.25% convertible senior notes due 2021, which were issued on July 20, 2018, to exchange the existing notes for cash and shares of the company’s common stock.

The proceeds of the new notes are expected to be used to pay the cash consideration of the exchange agreements, with remaining proceeds earmarked for general corporate purposes.

Arbor Realty Trust is a Uniondale, N.Y.-based real estate investment trust and national direct lender.

Mentioned in this article:

Arbor Realty Trust Inc. NYSE: ABR

DTE Energy Co. NYSE: DTE

Cytokinetics Inc. Nasdaq: CYTK

Sierra Oncology Inc. Nasdaq: SRRA

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