Sarepta on tap; Alnylam offering oversubscribed; Wayfair gains continue; Nio, Li Auto up

By Abigail W. Adams

Portland, Me., Sept. 12 – The convertibles primary market saw an active start to the week with two large offerings on deck.

Sarepta Therapeutics Inc. plans to price $1 billion of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $150 million.

Alnylam Pharmaceuticals Inc. plans to price $900 million of five-year convertible notes after the market close on Monday.

The deal looked cheap based on underwriters’ assumptions and played to heavy demand with books heard to be as much as 4x oversubscribed.

The new deal comes as equity markets extended their gains on the eve of the release of August’s Consumer Price Index report on Tuesday.

The Dow Jones industrial average closed Monday up 230 points, or 0.71%, the S&P 500 index closed up 1.06%, the Nasdaq Composite index closed up 1.27% and the Russell 2000 index closed up 1.23%.

There was $31 million in reported volume about one hour into the session and $450 million in reported volume about one hour before the market close.

The secondary space was moving as market players made room for new paper.

With equity markets up and credit tighter, the market remained better to buy.

Wayfair Inc.’s new 3.25% convertible notes due 2027 continued to climb on an outright and dollar-neutral basis.

Monday marked a strong day for the convertible notes of China-based electric vehicle manufacturers with Nio Inc.’s 0% convertible bonds due 2026 gaining outright and Li Auto Inc.’s 0.25% convertibles due 2028 up on swap.

Alnylam eyed

Alnylam plans to price $900 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 375 basis points over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked about 4 points cheap at the midpoint of talk, sources said.

The offering was interesting with the biopharmaceutical company a large cap company with a large negative EBITDA, a source said.

However, Alnylam is a leader in RNA interference therapeutics with several products on the market and several more in development.

The company recently released positive results from a clinical trial for its heart disease drug, which caused a spike in stock.

The biotech is not without its controversies with one of the products in its pipeline targeting Lou Gehrig’s disease.

The failure of Biogen’s phase 3 trial for its ALS treatment in 2021 is still fresh in the minds of wary investors, a source said.

The Food and Drug Administration accepted a New Drug Application for Biogen’s treatment with additional data in July 2022 and granted it priority review status.

Some sources felt the credit spread was tight with the company’s bank debt trading at spreads of 800 bps.

However, proceeds will be used to retire the company’s bank debt.

“It’s a little bit of a conundrum,” a source said. “It’s a huge market cap but maybe it will get better revenue and will look better from a cash flow perspective,” a source said.

However, the deal sparked the interest of the market and played to heavy demand.

Books closed early with the deal heard to be almost 4x oversubscribed, a source said.

Wayfair marches higher

Wayfair’s new 3.25% convertible notes due 2027 continued their upward momentum with the notes continuing to add on an outright and dollar-neutral basis.

The 3.25% notes jumped another 4 points outright.

They were changing hands at 110.75 versus a stock price of $54.97 in the late afternoon.

The notes expanded another 0.5 point dollar-neutral, sources said.

“They’re continuing to march,” a source said.

Wayfair’s stock traded to a low of $52.02 and a high of $56.32 before closing the day at $55.95, an increase of 7.66%.

China’s EV industry

Monday marked a strong session for the convertible notes of China’s EV makers with Nio’s 0% convertible notes due 2026 rising outright and Li Auto’s 0.25% convertible notes due 2028 up on swap.

Neo’s 0% convertible notes due 2026 gained 1 point outright.

They rose to an 88-handle and were seen at 88.375 in the late afternoon.

The yield on the notes was about 9.15%.

There was $5 million in reported volume.

Nio’s American Depositary Shares traded to a high of $21.88 and a low of $20.01 before closing the day at $21.75, an increase of 13.52%.

Stock jumped after a Deutsche Bank analyst singled out Nio as the top EV manufacturer in China, in part because of the frenzy surrounding its new ET5 midsized sedan with first deliveries beginning at the end of September.

While Nio’s equity jumped on the vote of confidence from analysts, Li Auto’s equity declined.

However, Li Auto’s 0.25% convertible notes due 2028 expanded on the move down.

The 0.25% notes were off about 0.5 point outright with stock down more than 1% in intraday activity.

The notes were changing hands at 113.125 versus an equity price of $25.54 in the late afternoon.

They expanded about 0.5 point dollar-neutral.

Li Auto’s ADS traded to a high of $26.80 and a low of $25.25 before closing the day at $26.06, a decrease of 1.03%.

China’s electric vehicle industry continues to see an explosion in growth with EV sales up 100% year over year, Barron’s reported.

Mentioned in this article:

Alnylam Pharmaceuticals Inc. Nasdaq: ALNY

Li Auto Inc. Nasdaq: LI

Nio Inc. NYSE: NIO

Sarepta Therapeutics Inc. Nasdaq: SRPT

Wayfair Inc. NYSE: W

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