Ionis convertible notes offering oversubscribed, 2026 notes improve; Wayfair in focus

By Abigail W. Adams

Portland, Me., June 7 – The convertibles primary market returned to action after an almost two-week hiatus with one new deal set to price after the market close.

Ionis Pharmaceuticals Inc. plans to price $500 million of five-year convertible notes after the market close on Wednesday.

The latest refinancing deal to come to market was largely wall-crossed and covered at launch.

It was shaping up to be a blowout with the deal modeling cheap based on underwriters’ assumptions and the market hungry for new paper.

After a burst of issuance in early May, the primary market has been largely dormant for the past two weeks with the exception of Tilray Brands, Inc.’s $150 million issue of 5.2% convertible notes due 2027, which priced on May 25 and saw almost no secondary trading activity.

The market has been expecting a deluge of new paper in refinancings and from the biotech sector in 2023.

There is still a backlog of deals in the pipeline, a source said.

Issuers have been waiting for a resolution to the debt-ceiling debacle and awaiting to see the impact on Treasuries from a rush of pent-up issuance.

With the debt-limit deal passed and Treasuries weaker but largely stable, issuers may be ready to unleash their deals, a source said.

Meanwhile, trading activity in the secondary space remained muted on a mixed day for equities with the exception of certain names.

The Dow Jones industrial average closed Wednesday up 92 points, or 0.27%, the S&P 500 index closed down 0.38%, the Nasdaq Composite index closed down 1.29% and the Russell 2000 index closed up 1.78% shortly before 11 a.m. ET.

There was $88 million on the tape about one hour into the session and $475 million on the tape about one hour before the market close.

Wayfair Inc.’s convertible notes remained in focus with the notes improved dollar-neutral as the bull run in the company’s stock tempered.

Ionis’ 0% convertible notes due 2026 were active on the heels of the new offering with the notes down outright but improved dollar-neutral as the company addresses its 2024 maturities.

Ionis in focus

Ionis plans to price $500 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 325 basis points over SOFR and a 35% vol.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of talk, a source said.

But like most refinancing deals, the real value will come in the buyback of its outstanding notes.

Ionis plans to use proceeds to repurchase for cash a portion of the company’s 0.125% convertible notes due 2024 in privately negotiated transactions.

The new offering was wall-crossed and was already covered at launch, sources said.

The deal was shaping up to a be a blowout with additional demand strong.

Books closed in the early afternoon.

While Ionis prepped its latest offering, the biotech’s 0% convertible notes due 2026 were active in the secondary market.

The notes were lower outright as stock took a hit on the new offering, but improved dollar-neutral.

They fell 1.5 points outright to trade at 95.125 in the late afternoon.

The notes gained about 0.5 point dollar-neutral, a source said.

Ionis’ 0.125% notes were not active ahead of their buyback. However, they were trading on a 94-handle heading into Wednesday’s session.

Ionis’ stock traded to a high of $41.59 and a low of $40.22 before closing at $40.55, a decrease of 6.42%.

Wayfair’s run

Wayfair’s convertible notes continued to add in active trade with stock volatile on Wednesday as its bull run showed signs of waning.

The serial convertible note issuer’s 3.25% convertible notes due 2027 were the most active in the debt stack.

The notes added 3 points outright to trade up to 104.5 early in the session but came in as stock gave back its gains at the open.

They were changing hands at 102.75 versus a stock price of $49.38 in the late afternoon.

The notes gained 0.75 point dollar-neutral, a source said.

There was $23 million in reported volume.

The high-premium 1% convertible notes due 2026 added 2 points outright to trade at 76.375 early in the session.

They traded up to 77.125 versus a stock price of $50.21 in the late afternoon.

There was $18 million in reported volume.

Wayfair’s most recently priced 3.5% convertible notes due 2028 continued to set new outright heights with the notes adding 4 points to trade up to 131 early in the session.

They were changing hands at 128 versus a stock price of $49.32 in the late afternoon.

There was $19 million in reported volume.

Wayfair’s stock was volatile on Wednesday after an almost 25% gain over the past week.

Stock added as much as 7% at the open but turned negative as the session progressed and closed with nominal losses.

Wayfair’s stock traded to a high of $52.97 and a low of $48.63 before closing at $49.30, off 0.28%.

Mentioned in this article:

Ionis Pharmaceuticals Inc. Nasdaq: IONS

Wayfair Inc. NYSE: W

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