Morning Commentary: NextGen convertibles on deck, ‘looks good’; Wolfspeed falls post-earnings

By Abigail W. Adams

Portland, Me., Oct. 27 – The convertible primary market returned to action on Thursday with the first deal in nearly two weeks set to price after the market close.

NextGen Healthcare Inc. plans to price $200 million in five-year convertible notes with price talk for a coupon of 3.75% to 4.25% and an initial conversion premium of 30% to 35%, according to a market source.

The deal is expected to be a blowout.

Underwriters were marketing the deal with assumptions of a 500 basis points credit spread and a 32% vol.

Using those assumptions, the deal modeled about 3 points cheap at the midpoint of talk, a source said.

The company is a money maker.

The chunky coupon was also attractive and a welcome shift from the low to no-coupon deals that previously populated the market.

“This looks good,” a source said. “Pricing is going the right way for investors.”

Meanwhile, earnings-related volatility sparked movement in the space with Wolfspeed Inc.’s 0.25% convertible notes due 2028 tanking outright as stock fell double digits post-earnings.

The 0.25% convertible notes sank 12 points outright with stock down 20%.

They were changing hands at 96.625 versus a stock price of $88.70 early in the session, according to a market source.

There was $20 million in reported volume with the notes composing nearly half of the $96 million in reported volume on the tape.

Wolfspeed stock traded down to $84.81, a decrease of 20.19%, shortly before 11 a.m. ET.

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