Morning Commentary: Aspen Aerogels convertibles offering pulled; Cytokinetics on tap

By Abigail W. Adams

Portland, Me., June 30 – Convertibles primary market activity took a hit amid volatility in equity markets with one of the two bond offerings in store for the final week of June pulled.

While Aspen Aerogels, Inc. canceled its planned concurrent offerings of $150 million five-year green convertible notes and $225 million of common stock, Cytokinetics Inc.’s $450 million of five-year convertible notes is still slated to price after the market close.

Aspen’s convertible notes played to solid demand, but the company could not withstand the damage the offering inflicted on the company’s stock, sources said.

While a sizable offering, Cytokinetics’ convertible notes was a refinancing deal and was mostly already spoken for by the largest holders of its outstanding notes.

Meanwhile, the secondary space was quiet as heavy selling resumed in equity markets.

The Dow Jones industrial average was down 357 points, or 1.14%, the S&P 500 index was down 1.16%, the Nasdaq Composite index was down 1.58% and the Russell 2000 index was down 1.14% shortly before 11 a.m. ET.

The convertibles secondary space was again quiet in the midst of the sell-off with $41 million in reported volume a little more than one hour into the session.

Few names saw concentrated trading activity, a source said.

Cytokinetics eyed

Cytokinetics plans to price $450 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 575 basis points over Libor and a 45% vol., a source said.

Proceeds will be used to repurchase a portion of the company’s 4% convertible notes due 2026 in privately negotiated transactions.

The deal was more financial engineering, a source said.

The 4% convertible notes are deep-in-the-money and have been trading at 475.

Taking out the two largest holders of the 4% notes accounts for the lion’s share of the new deal on deck, a source said.

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