Morning Commentary: ON Semiconductor notes eyed; Insmed, Dynavax, LCI hit aftermarket

By Abigail W. Adams

Portland, Me., May 11 – New convertibles paper was in focus on Tuesday with three new offerings totaling $1.1 billion making their aftermarket debut and a $700 million offering set to price after the market close.

ON Semiconductor Corp. plans to price $700 million of six-year convertible notes after the market close on Tuesday with the company eyeing aggressive pricing terms, despite the continued sell-off in the tech sector.

However, while the terms were aggressive, the deal modeled cheap based on underwriters’ assumptions.

Meanwhile, new paper from LCI Industries, Dynavax Technologies Corp. and Insmed Inc. made their aftermarket debut on another brutal day for equities.

The Dow Jones industrial average was down 603 points, or 1.74%, the S&P 500 down 1.58% and the Nasdaq composite down 1.3% shortly before 11 a.m. ET.

Despite the brutal day for equities, LCI’s and Insmed’s convertible notes were performing well early in the session.

ON notes in focus

ON Semiconductor plans to price $700 million of six-year convertible notes after the market close on Tuesday with price talk for a fixed coupon of 0% and an initial conversion premium of 40% to 45%, according to a market source.

The deal was heard to be in the market with assumptions of 215 basis points over Libor and a 40% vol.

Using those assumptions, the deal looked 1.25 points cheap at the midpoint of talk.

LCI holds

LCI Industries priced $400 million of five-year convertible notes after the market close on Monday at par with a coupon of 1.125% and an initial conversion premium of 27.5%.

Pricing came toward the cheap end of talk for a coupon of 0.75% to 1.25% and at the cheap end of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The new paper was holding up well despite the brutal day for equities. It traded as high as 101 as stock spiked up shortly after the opening bell.

However, the notes dropped back down to par as stock turned negative.

The 1.125% notes were flat dollar-neutral, a source said.

LCI’s stock was changing hands at $129.36, a decrease of 0.43%, shortly before 11 a.m. ET.

Dynavax comes cheap

Dynavax Technologies priced $200 million of five-year convertible notes after the market close on Monday at par with a coupon of 2.5% and an initial conversion premium of 32.5%, according to a company news release.

Pricing came at the cheap end of talk for a coupon of 2% to 2.5% and in the middle of talk for an initial conversion premium of 30% to 35%, according to a market source.

The new paper was not seen on Trace early in the session.

However, Dynavax’s stock continued to get crushed with stock down another 6% early Tuesday.

Insmed gains

Insmed priced $500 million of seven-year convertible notes after the market close on Monday at par with a coupon of 0.75% and an initial conversion premium of 30%.

Pricing came at the midpoint of talk for a coupon of 0.5% to 1% and at the rich end of talk for an initial conversion premium of 25% to 30%, according to a market source.

The new paper was performing well on an outright and dollar-neutral basis despite a brutal day for equities.

While the notes dropped below par with stock down shortly after the opening bell, they gained as stock improved.

The notes were changing hands at 102 about one hour after the opening bell.

The convertibles expanded 0.5 to 1 point dollar-neutral, a source said.

Insmed’s stock was changing hands at $26.38, an increase of 1.52%, shortly before 11 a.m. ET.

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