Morning Commentary: Assertio taps convertibles market; Palo Alto grabs spotlight early

Chicago, Aug. 23 – A quiet convertibles primary market had a surprise when an issuer popped up with a small deal late Monday.

Assertio Holdings Inc., a Lake Forest, Ill.-based pharmaceutical company, turned up with a $60 million offering of five-year convertible bonds aimed at taking out some 13% senior secured notes due 2024 that the company had on the books.

Rounding up investors who had heard of the deal, from mandatory vacation leave, was not easy – but those who were still in the office merely shrugged.

Yes, it was a deal, but not a “real deal,” a market source said.

The Assertio deal is designed to refinance notes that the company picked up in an acquisition. The company had acquired Zyla, which had changed its name from Egalet – after a bankruptcy for Egalet which enabled it to buy four marketed products from Iroko. Those 13% notes came packaged out of a series of transactions around the time of the bankruptcy/acquisition/name change.

Pricing on the new deal came cheap for investors who bought the notes. They got a 6.5% coupon at the high end of the 5.5% to 6.5% range and then the conversion premium came at 12.5%, the low end of the 12.5% to 17.5% talk.

Palo Alto

Tuesday is looking great for Palo Alto Networks Inc.’s 0.75% convertible notes due 2023.

The notes were active on Monday, but they actually ended the day lower as the market was jittery moments before the company released earnings.

And, then the cybersecurity company crushed it with a better-than-expected earnings report.

Stock was up over 11% mid-morning Tuesday.

In the early going, the notes were around 17 to 18 points higher, sources said.

One source marked them as high as 211.625 mid-morning. The notes were falling Monday afternoon and had closed with the last trades roughly around 192.

Palo Alto announced a three-for-one stock split and increased its share repurchase program an additional $915 million, to $1 billion, through Dec. 31, 2023, the company announced in its earnings press release.

Volume

There was more than $50 million in volume on Tuesday morning on the convertibles tape, a market source said.

This is roughly double the volume at the same point on Monday.

The Dow Jones industrial average was off 0.34% and the S&P 500 index was flat early in the session.

The Nasdaq Composite was actually up around 0.016% (Palo Alto is in the Nasdaq-100 index as of December 2021) and the Russell 2000 index was also on an upswing, up 0.8%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.