(^88) International Financing Review March 7 2020
FRONT STORY US
BridgeBio races from IPO to CB
KKR-backed biotech raises up to US$550m from upsized CB
BRIDGEBIO PHARMA made a splash on
Wednesday by landing an upsized US$475m
from the sale of a seven-year CB, a stunning
outcome for a clinical-stage biotech that
only completed its IPO in June.
BridgeBio’s nine-month gap between IPO
and CB may fall short of the eight months
FORû7ORKDAYûINûûANDûAûREMARKABLEûlVE
month gap for DocuSign in 2018, but those
had observable credits informed by
RECURRINGûCASHmOWûANDûFAST
GROWINGû
revenue.
BridgeBio, by comparison, is not
projected to break even on an operating
basis until 2024 and is expected to lose
US$1.4bn between now and then, analysts
at Jefferies estimated in a recent note to
clients.
The offering was not just upsized, but
massively so, from US$325m at the public
launch to US$475m with another US$75m
possible on the greenshoe. That compares to
the US$400.8m BridgeBio raised from its IPO
last June at US$17 per share.
Before the market selloff in late February
BridgeBio’s shares had more than doubled
since the IPO.
The biotech will pay a coupon of just 2.5%
with investors eligible to convert at a 37.5%
premium, the midpoint of marketed talk. A
call spread offsets economic dilution to
prices above US$62.12, a 100% premium to
the reference price.
The underlying stock fell just 4.7% to
US$31.06 during Tuesday’s marketing effort.
BridgeBio now has roughly US$1bn in the
bank to fund development.
JP Morgan, Bank of America, Mizuho Securities,
Piper Sandler and KKR (a 29.9% shareholder)
TOOKûTHEûEXTRAûPRECAUTIONûOFûCONlDENTIALLYû
marketing on Tuesday ahead of the public
launch.
The CB was marketed at a credit spread of
400bp and implied vol of 42% supported by
the success of other recent pre-clinical
biotech CBs such as Revance Therapeutics’
US$250m seven-year which priced last
month.
The credit spread and vol are realistic,
even if a bit stretched on either front.
BridgeBio has a robust US$3.8bn market cap
- including a 65.5% stake in Eidos
Therapeutics, which BridgeBio spun off in
- There is also a broad pipeline of 20 drugs,
including a promising cardiovascular drug
developed by Eidos that is about to launch a
Phase III trial this year.
Analysts at Jefferies expect BridgeBio’s
share of revenue from the Eidos drug at just
above US$1bn by 2027. Add in sales of other
drugs and that estimate climbs to US$2.1bn
ANDûANûOPERATINGûPROlTûOFû53MûBYûTHEû
time the CB matures.
BridgeBio could have easily sold stock.
The CB is an option that gives investors
downside protection if all does not go
according to plan.
Robert Sherwood
Korian jumps on market rise
Care homes operator sets premium high
Care homes operator KORIAN sold €400m
seven-year convertible bonds on Tuesday,
with pricing on the coupon coming at the
best end for investors.
“We’ve been monitoring conditions for
the past few days to identify a tiny window
we could seize to launch this deal and this
WASûTHEûlRSTûONEûAVAILABLE vûSAIDûAûBANKERû
involved. “Once we saw markets opening in
positive territory, followed by the Fed’s
announcement of a 50bp rate cut as
anticipated by the market, we pressed
AHEADv
The deal was launched later than is typical- at 9:45am in London – providing time to
gauge which direction markets were
moving.
“We could have waited longer, but no-one
knows when the next window comes, to be
HONEST vûSAIDûTHEûBANKER
The OCEANEs was launched with
guidance of 0.125%–0.875% for the coupon,
WITHûAûlXEDûPREMIUMûOFû
Pre-sounding would have hindered a quick
launch so was not pursued.
Books were covered by 11:45am, with
investors guided towards pricing at a 0.875%
coupon, the best end for investors, just over
two hours later.
There is a call after four years, subject to a
130% trigger, and full dividend protection.
Korian has previous experience in equity-
linked, having issued an upsized €240m 2.5%
perpetual hybrid in 2017, which it then tapped
for €60m in 2018. As those bonds are perpetual it
was the convertible and straight bonds from peer
Orpea that were the basis for a credit spread of
215bp. There was some pushback from investors
saying that the market backdrop deserved a
slight premium to that. Borrow was available.
The company has a market capitalisation
of €3.2bn so the shares underlying the bond
represent around 8% of the company.
Implied vol was 21%–28.5% versus historic
over 100 days of 19% and 23.5% at 250 days.
4HEûBONDûmOORûONûGUIDANCEûWASû–93.7%.A book of more than 50 lines had strong
representation from outright investors,
although early orders came largely from
hedge funds. A second banker said that some
investors chose not to participate as they saw
more value in the outstanding perpetual
bonds.
Korian shares rose more than 5% in early
trading on Tuesday and fell back in the early
afternoon after guidance on pricing. The
stock closed down 2.13% on the day at
€38.60.
Pricing came after the London market
close with a reference price of €39.70, and a
corresponding conversion price on 55%
premium of €61.53.
Proceeds will be used for general corporate
purposes. Korian has already made two
acquisitions in the Netherlands and one in
France so far this year.
BNP Paribas and Morgan Stanley were
bookrunners.
Robert VenesSTRUCTURED EQUITY
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