Mirum convertibles play to strong demand; Cutera falls; American Airlines up on swap

By Abigail W. Adams

Portland, Me., April 12 – The convertibles primary market returned to action on Wednesday with one new offering on deck.

Mirum Pharmaceuticals Inc. plans to price $200 million of six-year convertible notes after the market close on Wednesday.

The deal was heard to be wall-crossed with allocations expected to be tight.

The deal launched on a green start for equity and credit markets, which initially responded favorably to the latest Consumer Price Index report but reversed into the close.

The report came in largely as expected with the overall CPI print 5%, below the 5.1% forecast, and the core CPI print 5.6%, in line with expectations.

However, selling pressure took hold following the release of the Federal Open Market Committee’s March minute notes with Fed officials signaling a May rate increase despite new consensus that a recession will hit by the end of 2023.

The Dow Jones industrial average closed Wednesday down 38 points, or 0.11%, the S&P 500 index closed down 0.41%, the Nasdaq Composite index closed down 0.85% and the Russell 2000 index closed down 0.72%.

The secondary space was better to buy early in the session but was leaking into the close, a source said.

Trading volume remained concentrated in investment-grade issues.

However, topical news and earnings pushed some outstanding issues into the spotlight.

Cutera Inc.’s convertible notes were the disaster of Wednesday’s session with the notes contracting as stock cratered following boardroom drama that resulted in the ouster of the company’s CEO and executive chairman.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 were down outright but up on swap as stock fell on updated earnings guidance.

Mirum eyed

Mirum Pharmaceuticals plans to price $200 million of six-year convertible notes after the market close on Wednesday with price talk for a fixed coupon of 4% and a fixed initial conversion premium of 32.5%.

The deal was heard to be in the market with assumptions of an 800 basis points credit spread and a 43% vol.

Using those assumptions, the deal looked 3.45 points cheap, a source said.

The deal was wall-crossed, a source said.

Allocations were expected to be tight and favor outright accounts.

Mirum Pharmaceuticals is a speculative company with a market cap of $857 million.

While the company has no earnings, it also has no debt, a source said.

“This is good,” a source said. “We need new paper.”

The deal was expected to trade well in the aftermarket.

Cutera falls

Cutera’s convertible notes were the disaster of Wednesday’s session with the notes contracting as stock cratered on boardroom drama.

Cutera’s 4% convertible notes due 2029 sank 6 points outright with stock off 25%.

The notes traded down to 68.375 in the late afternoon.

They contracted 3 points dollar-neutral, a source said.

Cutera’s 2.25% convertible notes due 2026 were off 1.5 points dollar-neutral.

Cutera’s stock traded to a low $18.47 and a high of $23.63 before closing at $19.44, a decrease of 28.19%.

Stock sank after the company announced the termination of its CEO and executive chairman following a bitter boardroom feud.

Cutera’s former executive chairman, Daniel Plants, and CEO David Mowry were terminated after issuing a joint statement on Monday calling for the removal of a slate of board members Plants and Mowry alleged were obstructing the succession planning process for Mowry’s pending retirement.

American Airlines up on swap

American Airlines’ 6.5% convertible notes due 2025 were down outright but improved on swap as stock fell on updated guidance.

The 6.5% notes fell 6 points outright with stock down about 10%.

They were changing hands at 108 heading into the market close.

The notes gained about 0.5 point dollar-neutral on the move down.

American Airlines’ stock traded to a low of $12.91 and a high of $13.85 before closing at $13.00, a decrease of 9.22%.

American Airlines announced it expects to report earnings per share of 1 to 5 cents later in the month, which fell below analyst expectations for earnings of 5 cents.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

Cutera Inc. Nasdaq: CUTR

Mirum Pharmaceuticals Inc. Nasdaq: MIRM

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