Morning Commentary: Bandwidth convertible offering eyed; Exact Sciences expands on debut

By Abigail W. Adams

Portland, Me., Feb. 25 – The convertibles primary market remained active on Tuesday with another overnight offering launching as equity markets extended their losses from Monday’s sell-off.

Bandwidth Inc. plans to price $300 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.25% to 0.75% and an initial conversion premium of 30% to 35%, according to a market source.

The deal was heard to be marketed with assumptions of 375 basis points over Libor and a 40% vol.

Using those assumptions, the deal modeled about 1.5 points cheap at the midpoint of talk, a source said.

Meanwhile, Exact Sciences Corp.’s newest offering was “the talk of the town,” a market source said.

In an overnight deal on Monday, the Madison, Wis.-based molecular diagnostics company priced an upsized $1 billion of eight-year convertible notes at par with a coupon of 0.375% and an initial conversion premium of 27.5%.

The new paper dominated activity in the secondary space and was expanding on debut.

The new 0.375% convertible notes due 2028 were changing hands between 101 and 101.5 with stock off more than 8% about one hour into Tuesday’s session, a market source said.

While Exact Sciences’ newest offering was expanding, its outstanding 0.375% convertible notes due 2027 were contracting.

The 0.375% convertible notes due 2027 were down about 7 points outright to 107.625 early in the session.

They were contracted about 1 point dollar-neutral, a market source said.

Exact Sciences stock traded down to $85.90, a decrease of 10.19%, shortly before 11 a.m. ET.

Exact Sciences is a serial issuer of convertible notes with approximately $900 million outstanding of its 1% convertible notes due 2025 and $747 million outstanding of its 0.375% convertible notes due 2027, according to Trace data.

Approximately $150 million of net proceeds from the latest offering will be used to repurchase a portion of the company’s 1% convertible notes due 2025.

While volume was light, the 1% convertible notes were changing hands around 150 early Tuesday.

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