New Huron Consulting trades at par; Depomed shares push higher after court decision

By Rebecca Melvin

New York, Sept. 5 – Huron Consulting Group Inc.’s newly priced 1.25% convertibles traded right at par on Friday after the Chicago-based consulting company priced $225 million of the five-year notes at the cheap end of talk.

The Huron notes were called 99.5 bid, 100.5 offered with the underlying shares at about $62.50, which was just slightly lower. Later shares veered higher, but the bonds were still at par, a New York-based trader said.

Depomed Inc.’s new 2.5% convertibles lost some ground on a hedged basis on Friday afternoon as shares of the Newark, Calif.-based specialty pharmaceutical company lifted suddenly following news of a favorable summary judgment in a lawsuit.

The bonds had outperformed on their debut on Thursday with a 2-point gain on a dollar-neutral, or hedged, basis.

Although the U.S. primary market saw four new deals this week, the trading action surrounding the deals was called “uneventful.”

“These are smaller issues. They come and go like a ship in the night,” a New York-based trader said.

Traders have said that they are looking for something bigger like a $1 billion plus offering.

That said, Priceline Group Inc.’s 0.9% convertibles issue, which was a $1 billion deal that priced last month, was seen lower on an outright basis on Friday but unchanged on a dollar-neutral basis at 97.

“They traded down with the stock. If you were outright, you lost a little, but they are unchanged dollar neutral,” the trader said.

Overall, most things traded in line with the underlying shares, a trader said. But Newmont Mining Corp.’s 1.625% convertibles due 2017 were lower by about 0.5 point on Friday as the shares traded up. The Newmont convertibles traded at 106.125.

Market players expect the pace of new issuance to be strong. “High yield and investment grade have a massive pipeline, and at least some of that should fall to convertibles,” a trader said.

In economic data, U.S. nonfarm payrolls added a seasonally adjusted 142,000 jobs for August, the Labor Department said Friday. That was well below economists’ expectations for an increase of about, 225,000.

The unemployment rate ticked down to a seasonally adjusted 6.1% in August from 6.2% in July.

Stocks ended higher after a weak start.

Huron trades at par

Huron’s 1.25% convertibles were trading at par most of the day, and earlier in the day they were quoted at 99.5 bid, 100.5 offered.

Shares started higher and moved back to the unchanged mark before ending up 34 cents, or 0.5%, at $63.00.

Buyers could buy at par and sellers could sell at par, a trader said.

The paper was trading on swap and were seen “wrapped around issue,” or unchanged.

The Chicago-based operational and financial consulting services company priced $225 million five-year convertibles at par after the market close Thursday to yield 1.25% with an initial conversion premium of 27.5%.

BofA Merrill Lynch and J.P. Morgan Securities LLC were joint bookrunners of the deal, for which there is a $25 million greenshoe.

RBS Securities Inc. was senior co-manager. Co-managers were BMO Capital Markets Corp., KeyBank Capital Markets LLC, PNC Capital Markets LLC and BBVA.

The senior notes, which mature Oct. 1, 2019, are non-callable for life with no puts. They have contingent conversion if shares rise to 130% of the conversion price.

Depomed outperforms on debut

Depomed’s 2.5% convertibles due 2021 traded down to about 100.5 with the underlying shares down 2% on Friday. That was down compared to its debut when it was up 2 points on a dollar-neutral basis, or on hedge, which outperformed.

On Friday, Depomed shares rose 9 cents, or 0.7%, to $13.95. Earlier the shares had been lower. News that the company received a summary judgment that requires that the FDA grant Orphan Drug exclusivity for its Gralise drug for the management of postherpetic neuralgia pulled shares higher.

Contrasting Depomed, the Newark, Calif.-based specialty pharmaceutical company, with the other two deals that priced at the same time, a trader said: “Clovis is a stock story; the company makes no money. And Electronics For Imaging is nothing special, guys flipped them right back. They trade up, somebody flips them, and then they get sold back and put away,” the trader said.

Mentioned in this article:

Clovis Oncology Inc. Nasdaq: CLVS

Depomed Inc. Nasdaq: DEPO

Electronics For Imaging Inc. Nasdaq: EFII

Huron Consulting Group Inc. Nasdaq: HURN

Newmont Mining Corp. NYSE: NEM

Priceline Group Inc. Nasdaq: PCLN

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