Priceline trades to 101 on debut; Nektar extends gains; SandDisk retraces gains; AMD rises

By Rebecca Melvin

New York, March 5 - Priceline.com Inc.'s newly priced 1.25% convertibles traded up to 101 out of the chute on Friday after the issue priced at the midpoint of talk late Thursday.

The paper was later seen lower at 100.375 bid, 100.625 offered and also at 100.5 bid, 100.875 offered, and trading of the new paper was light, market sources remarked.

"It was around 'plus one' early, but I haven't seen them much since the opening," a sellsider close to the deal said.

Nektar Therapeutics was up again, marking a continuation of action from earlier in the week, when the Nektar convertibles gained on reaffirmed optimism about the company's product line.

RadioShack Corp. was also in trade after a move earlier in the week when the consumer electronics retailer saw its shares jump on speculation about a possible takeover. The RadioShack convertibles traded at 114.5 versus a share price of $2.00 on Friday.

Technology companies, which were better bid during the week, continued in trade, including SanDisk Corp. and Advanced Micro Devices Inc.

AMD's 6% convertibles broke out of a range in which they had been stuck for a month to trade at 93.125.

Also on Friday, L-3 Communications Holdings Inc.'s 3% convertibles were trading actively and seen at 105.88 last, according to a New York-based sellside trader.

But Allergan Inc., which saw its shares boosted by an upgrade to "buy" from Lazard, was mostly quiet, as was Tyson Foods Inc., which was downgraded to "hold" from "buy" by BB&T Capital.

The convertibles market overall quieted on Friday from a higher level of activity on Wednesday and Thursday. But pricing remained strong, however, as equities climbed amid improved confidence of economic recovery after nonfarm payrolls came in better than expected.

The economy lost 36,000 jobs compared to a loss of 68,000 expected. The Bureau of Labor Statistics reported an unemployment rate of 9.7% and said in its unemployment report: "it is not possible to quantify precisely the net impact of the winter storms on these measures."

Priceline adds a point

Priceline's 1.25% convertibles due 2015 traded at 101 and later a little weaker at 100.375 bid, 100.625 offered versus a share price of $233.12.

Later the paper was 100.5 bid, 100.875 offered versus a share price of $234.00.

Shares of the Norwalk, Conn.-based online travel agency settled higher at $235.34, which was up $2.22, or nearly 1%, on the day.

Priceline launched and priced $500 million of five-year convertible notes on Thursday to yield 1.25% with an initial conversion premium of 30%.

The Rule 144A deal came at the midpoint of talk, which was for a yield of 1% to 1.5% and an initial conversion premium of 27.5% to 32.5%.

Concurrently with the offering, Priceline bought back up to $100 million of its outstanding common stock in privately negotiated, off-market transactions.

"That is actually a very standard feature that many issuers have historically used," a syndicate source said of the share buyback. "It was just not as prevalent in 2009 because most issuers needed the cash to repay debt, so buying back stock was not a priority."

But even in 2009, Intel and Alliance Data Systems bought back stock simultaneously with a convertible offering, and it was also done by many companies in 2007, the syndicate source said.

Such deals included those of Amgen, Archer-Daniels-Midland, Lincare, Tektronix and others.

Proceeds are also earmarked for general corporate purposes, which may include repurchasing shares in the open market or in privately negotiated transactions from time to time, repaying outstanding debt and corporate acquisitions.

In connection with the offering, Priceline's board authorized the repurchase of up to $500 million of Priceline common stock.

Nektar extends gains

Nektar's 3.25% convertibles due 2012 traded up to par versus a share price of $15.00 on Friday, compared to 97.625 against a stock price of $14.15 on Wednesday.

The 2-point climb in the convertibles on Wednesday was in tandem with a 14% jump in the underlying shares, which closed that day at $14.32.

On Friday, shares of the San Carlos, Calif.-based drug development company rose another 36 cents, or 2.47%, on the day to settle at $14.94.

The convertibles have been active much of the week following earnings on Tuesday, when Nektar said it lost $7.7 million, or 8 cents per share, in its fourth quarter, down from a profit of $76.8 million, or 83 cents per share, in the year-ago period.

On Wednesday, analysts expressed optimism about the company's product pipeline. Analysts at BMO Capital Markets and Cowen and Co. maintained "outperform" ratings on the company, while Brean, Murray Carret & Co. kept a "buy" recommendation.

SanDisk retraces gains

SanDisk's 1% convertible due 2013 ended the session down about 2.5 points at 83.75, which was down from about 86.5 early in the session and on Thursday.

This was despite shares of the Milpitas, Calif.-based flash memory maker moving up $1.15, or 4%, to $33.32 on the day.

A level of about 83 is where the paper had previously been trading.

The paper had been active much of the week. On Tuesday, UBS upgraded its recommendation on the SanDisk stock to "neutral" from "sell."

Advanced Micro Devices' 6% convertibles due 2015 traded at 93.125 on Friday, and one sellsider had the paper trading as high as 93.5, compared to 93 on Thursday.

Shares of the Santa Clara, Calif.-based semiconductor company added 1.1 cents, or 1.3%, to $8.61.

The AMD 6s had been trading in a narrow range of 92.5 to 93 for about a month, according to a Connecticut-based sellsider.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Allergan Inc. NYSE: AGN

Nektar Therapeutics Nasdaq: NKTR

L-3 Communications Holdings Inc. NYSE: LLL

Priceline.com Inc. Nasdaq: PCLN

RadioShack Corp. NYSE: RSH

SandDisk Corp. Nasdaq: SNDK

Tyson Foods Inc. NYSE: TSN

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