Cerence, World Kinect convertibles on tap; Lumentum lower; Exact Sciences volatile

By Abigail W. Adams

Portland, Me., June 21 – The convertibles primary market returned to action on Wednesday with two deals on deck.

In a wall-crossed offering set to price shortly after launching, Cerence Inc. plans to sell $190 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 20% to 25%, according to a market source.

Morgan Stanley & Co. LLC and Wells Fargo Securities LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $20 million.

World Kinect Corp. also plans to price $250 million of five-year convertible notes after the market close on Wednesday.

The deal modeled cheap based on underwriters’ assumptions and was heard to be playing to solid demand during book building.

The deals come as the window of time for new issuance narrows before the second quarter draws to a close.

With equities starting to pull back from their recent rally and Fed officials signaling more rate hikes may be in store, sources expect companies to start green lighting some backlogged offerings.

However, the timing of those deals remains uncertain.

The new deals come on a volatile day for equities as markets digested Fed chair Jerome Powell’s congressional testimony.

Indexes opened the day in the red, fought off losses to turn mixed mid-session, but were dragged back to negative territory by late-day selling pressure.

The Dow Jones industrial average closed Wednesday down 102 points, or 0.30%, the S&P 500 index closed down 0.52%, the Nasdaq Composite index closed down 1.21% and the Russell 2000 index closed down 0.20%.

There was $57 million in reported convertibles trading volume about one hour into the session and $400 million on the tape about one hour before the market close.

Lantheus Holdings Inc.’s 2.625% convertible notes due 2027, an off-the-run issue that rarely trades in volume, was active with the notes lower alongside stock.

Lumentum Holdings Inc.’s 1.5% convertible notes due 2029 gave back all gains made in the head-scratching stock surge of the previous session with stock plunging back to its previous level on Wednesday.

Exact Sciences Corp.’s senior notes were volatile on an outright basis as stock launched the day with strong gains but closed with losses.

World Kinect eyed

World Kinect plans to price $250 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 25% to 30%.

The deal was heard to be in the market with assumptions of 400 basis points over SOFR and a 35% vol.

Using those assumptions, the deal looked 1.5 points to 2 points cheap at the midpoint of talk, sources said.

The Miami-based energy management company is a new name to the convertibles market with proceeds to be partially used to pay outstanding amounts under its revolving credit facility.

“It’s a brand-new name for the asset class,” a source said. “That’s always a good thing.”

The company had solid fundamentals and a strong cash flow, which helped drive demand for the notes.

The only drawback was in the small size of the offering, which would preclude the notes from an addition to the index, a source said.

Lantheus active

Lantheus Holdings’ 2.625% convertible notes due 2027, an off-the-run issue that rarely trades in volume, was active on Wednesday with the notes lower alongside stock.

The 2.625% notes were changing hands at 138.75 versus a stock price of $92.85 early in the session, according to a market source.

They were trading at 139 versus a stock price of $92.88 in the late afternoon.

There was $8 million in reported volume.

Lantheus’ stock traded to a high of $93.53 and a low of $91.56 before closing at $92.20, off 0.72%.

Lumentum gives back

Lumentum’s 1.5% convertible notes due 2029 gave back all gains from the head-scratching stock surge of the previous session as stock plunged back to its previous level.

The 1.5% notes were down about 7 points outright with stock off more than 9%.

They were changing hands at 102.75 versus a stock price of $55.96 in the late afternoon.

There was $7 million in reported volume.

Lumentum’s stock traded to a low of $54.94 and a high of $60.19 before closing at $55.80, a decrease of 9.08%.

Stock plunged on Wednesday for no identifiable reason after it surged on Tuesday for no identifiable reason.

Exact Sciences volatile

Exact Sciences’ convertible notes were volatile in active trade on Wednesday as stock launched the day with strong gains only to end the day with losses.

The diagnostics company’s 0.375% convertible notes due 2028 gained 2 points outright early in the session but closed down 2 points.

The notes were seen at 101.375 versus a stock price of $89.79 in the late afternoon.

The 0.375% convertible notes due 2027 sank 3 points outright heading into the market close.

They were trading at 104.875 versus a stock price of $88.81 in the late afternoon.

The 2% convertible notes due 2030 traded north of 150 early in the session before sinking to 136 by the market close.

“Dollar price-wise they’ve been all over the place,” a source said.

However, the notes were largely moving in line with stock and were unchanged dollar-neutral.

Exact Sciences’ stock traded to a high of $99 and a low of $88.15 before closing at $89.78, a decrease of 4.83%.

Stock launched the day with strong gains after the company announced positive clinical results for an updated version of its flagship Cologuard colon cancer test.

However, stock turned negative mid-session after the company hosted an investors’ day.

Mentioned in this article:

Exact Sciences Corp. Nasdaq: EXAS

Lantheus Holdings Inc. Nasdaq: LNTH

Lumentum Holdings Inc. Nasdaq: LITE

World Kinect Corp. NYSE: WKC

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