By Abigail W. Adams
Portland, Me., Dec. 5 – It was another quiet day of trading as the convertibles secondary market awaited the first new issue of the month. Cleveland Cliffs Inc. planned to price $275 million in seven-year convertible notes Tuesday night.
Price talk is for a coupon of 1.625% to 2.25% and an initial conversion premium of 32.5% to 37.5%, according to a market source.
The deal carries a $41.25 million greenshoe.
Terms emerged late in the day and the deal priced with a coupon of 1.5%, richer than talk, and an initial conversion premium of 35%, within talk.
BofA Merrill Lynch, Goldman Sachs & Co. LLC, Credit Suisse, Deutsche Bank Securities and Jefferies are acting as joint bookrunners for the registered deal.
For existing issues, the secondary market saw only $380 million in trades by late afternoon, according to a market source.
General Cable Corp.’s 4.5% convertible notes due 2029 were off to an early start and remained in focus throughout Tuesday’s session as investors responded to news of the company’s pending acquisition by Prysmian SpA.
Depomed Inc.’s struggling 2.5% convertible notes due 2021 were on the rise and center stage in trading activity during Tuesday’s session.
They were the most actively traded issue of the day with $32,781,000 of the convertible notes changing hands by late afternoon, according to a market source.
The pharmaceutical company announced Monday it was handing over the sale of its opioid-based medication Nucynta to Collegium Pharmaceutical Inc., eliminating its pain medication sales force and relocating company headquarters from Newark, Calif. to possibly the Midwest or East Coast.
The cable makers
General Cable’s 4.5% convertible notes due 2029 were heavily traded throughout Tuesday’s session solidifying around 105 after climbing more than 8 points on Monday in response to news of the acquisition by Prysmian.
The notes ended the day at 105.45, according to Trace data. The company’s stock also climbed to $29.80, an increase of 1.19% after a meteoric rise of 35.09% Monday.
“They’re trading on the merger,” a market source said. Prior to the merger announcement, the 4.5% convertible notes were trading below par.
Prysmian Group announced Monday that it had agreed on Sunday to acquire General Cable.
General Cable’s board of directors determined the $3 billion offer for the company’s outstanding shares at $30 a share was in the best interests of the shareholders and the company, according to the merger agreement.
General Cable’s $429.5 million of outstanding 4.5% convertible notes due 2029 are non-callable and have no put options, according to the Prospect News database. Prysmian plans to refinance all of General Cable’s debt, the company said on a conference call.
Prysmian itself has €300 million of outstanding 1.25% convertible notes due March 2018.
Depomed cuts spark gains
Depomed’s 2.5% convertible notes were center stage in the secondary market with the previously struggling notes regaining ground after the company announced it would no longer be marketing its opioid-based medication Nucynta.
The notes were trading between 81.167 and 84.350 before ending the day at 83.796, according to Trace data. Prior to the company announcement, the notes were trading in the mid-70s.
Depomed stock was also on the upswing closing the session at $7.86, an increase of 9.93%.
Depomed signed a commercialization agreement with Collegium Pharmaceuticals on Monday for its flagship Nucynta brand, enabling Depomed to eliminate its pain medication salesforce and brand spending.
The elimination of the salesforce reduces Depomed’s staff by 40% which will result in an anticipated savings of $70 million annually, according to a company release.
Due to the reduced workforce, Depomed is planning to relocate from its current headquarters in California to a smaller office space.
The anticipated savings from the relocation is $10 million annually, according to a company release.
Collegium will pay Depomed royalties for sales of the medication with a minimum royalty of $135 million per year for four years.
While Depomed’s third quarter earnings report on Nov. 7 beat analysts’ expectations and caused the 2.5% convertible notes to trade up from the low 70s to the mid 70s, the earnings per share of $0.14 reflected a 50% decrease from the third quarter in 2016.
The recent agreement with Collegium will position Depomed for future growth, according to the company release.
“Financially, Depomed is now well positioned to achieve our goals of EBITDA growth and margin improvement in line with, or better than, our peers,” said Arthur Higgins, president and chief executive officer of Depomed, in a press release.
At the time of the third quarter earnings report, Nucynta was named as one of the three pillars of the company’s future growth.
The company is now distancing itself from opioid medications as the products have come under increased scrutiny for their role in the opioid epidemic.
Earlier in November, Depomed sold its opioid-based nasal spray Lazanda to Slan Medical Holdings.
Depomed plans to rebrand itself a specialty pharmaceutical company and invest in neurology and specialty products.
Mentioned in this article:
| Cleveland Cliffs Inc.: | NYSE: CLF
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| General Cable Corp.: | NYSE: BGC
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| Depomed Inc.: | Nasdaq: DEPO
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