Amgen sees sellers ahead of maturity; Gilead Ds better; Lennar slips; Pacira to price

By Rebecca Melvin

New York, Jan. 15 - Amgen Inc.'s 0.375% convertibles, which mature Feb. 1, traded extremely actively on Tuesday, with pricing seen "fairly steady," as some long-only holders of the paper turned sellers ahead of the upcoming maturity.

Also in the biotech sector, Gilead Sciences Inc.'s 1.625% convertibles due 2016, or the D series, were pretty active and better outright and on a dollar-neutral basis.

"There were a couple of buyers in those," a New York-based trader said of Gilead.

Gilead's sister issues, a 1% convertible due 2014 and a 0.625% convertible that matures in May, were not heard in trade.

Kinross Gold Corp. traded pretty actively for a second straight day and was firm to slightly better in a very tight market as players eyed short-dated, solid credits to invest in as other paper matured or was put or called.

"It did trade pretty actively," a trader said of Kinross. "Guys are trying to find a place to park cash in light of some stuff going away like RIG and Medtronic, which is going away soon."

RIG is the ticker symbol of Transocean Ltd., which had a recent call/put in its 1.5% series C convertibles, representing the last of three big, liquid issues in the convertibles space.

Transocean also had a 1.625% series A convertible, which went away in January 2011, and a 1.5% series B convertible that went away in December.

Medtronic Inc.'s large, $2.2 billion 1.625% convertibles mature April 15, 2013.

"They need to park it somewhere and they look to pick up a little bit of yield for short-dated paper," the trader said.

Meanwhile, market players were valuing the planned $85 million of InterMune Inc. four-year convertible bonds, which was expected to price after the market close. The registered deal was seen 4 or 5 points cheap at the midpoint of talk, which was for a 3.125% to 3.625% coupon and a 25% to 30% yield.

InterMune's existing 2.5% convertible due 2018, which will remain the longest dated issue of this company, was seen better by a couple of points to about 80.375 bid, 80.625 offered.

The InterMune 5% convertibles, which are expected to be taken out with proceeds of the new issue, popped above par to around 103, a West Coast-based trader said.

Although the new deal was in focus due to "several moving parts," it wasn't expected to make a big splash in the market due to its size.

"It's a pretty small deal, and it's not going to trade very much away from the underwriters," a trader said.

The deal was being sold via Goldman Sachs & Co. and J.P. Morgan Securities LLC, as joint bookrunners.

Also trading in the convertibles market was Lennar Corp., after the Miami-based homebuilder posted strong earnings but was met with a "sell the news" reaction in the underlying shares. As a result, the three in-the-money issues of Lennar, which were expected to follow the shares on an outright basis, were also all down some on a dollar-neutral basis.

Back in the primary arena, Pacira Pharmaceuticals Inc. launched a $100 million deal of six-year convertible senior notes after the market close Tuesday that were seen pricing after the market close Wednesday.

The Rule 144A offering was talked with 3.5% to 4% coupon and a 27.5% to 32.5% initial conversion premium.

Pacira's bookrunners are Jefferies & Co. Inc. and Barclays.

Amgen pricing 'steady'

Amgen's 0.375% convertibles, which mature Feb. 1, traded actively on Tuesday amid sellers and closed the session around 110.25 bid, 110.50 offered, a New York-based trader said.

Shares of the Thousand Oaks, Calif.-based company ended the session lower by $1.48, or 2%, to $85.08.

Pricing was "pretty stable," a trader said regarding the convertibles. "They were just following the underlying shares lower."

"People are rotating out of these because they are about to mature. The fundamental, long-only accounts are selling it going into maturity," he said.

The Amgen convertibles are trading around parity or a little below, so if hedged players are in the name on a full delta, they would make a little bit of money, he said.

Meanwhile, the Gilead 1.625% convertibles were a little bit better on a dollar-neutral, or hedged, basis. They were about 0.125 point to 0.25 point better.

Gilead shares, a biopharmaceutical company based in Foster City, Calif., slipped 41 cents, or 0.5%, to $77.36 on Tuesday.

Improvement in the Gilead convertibles may also have had to do with sellers of Amgen replacing that paper with other names including Gilead.

InterMune to price

The planned InterMune issue was deemed cheap at the midpoint of talk, with one trader using a credit spread of 800 basis points over Libor and a 40% vol., getting them 4% cheap.

Borrow was said to be an issue by several market players. But there was another source that said borrow was not a problem in InterMune.

The Brisbane, Calif.-based biotech is also pricing a concurrent issue of ordinary shares.

The proceeds from both the convertible notes and the share offering will be used to repurchase early or at maturity InterMune's outstanding 5% convertible senior notes due 2015, as well as to fund the commercialization of Esbriet, to fund InterMune's Ascend trial and for general corporate purposes.

The planned convertibles were talked at a coupon of 3.125% to 3.625% and a premium of 25% to 30%.

The registered, off-the-shelf notes have a $12.75 million greenshoe, and there is an option to purchase up to an additional 1.875 million shares of common stock.

The notes will be non-callable for a year and provisionally callable for 2.5 years if the price of shares is 130% of the conversion price.

InterMune is focused on treatments for pulmonary, infectious and hepatic diseases.

Lennar trades a little lower

All three Lennar convertibles closed lower by about 0.5 point on a dollar-neutral basis.

The most actively traded Lennar 3.25% convertibles closed at about 186.25 bid, 186.75 offered versus the closing share price of $40.68.

The Lennar 2% convertibles of 2020 closed at about 150 bid, 150.25 offered versus a share price of $40.68.

There is also a 2.75% convertible due 2020 that was not heard in trade.

Year-over-year earnings were very strong, and in many cases, the results were better than expected. Nevertheless shares were weak.

Because the shares didn't do much, the convertibles didn't either, and given that the vol. event that was being anticipated came and went uneventfully, implied vol. in the name "came in a little bit," a source said.

The Lennar notes trade on a high 80% to low 90% delta.

Pacira to price

Pacira, a Parsippany, N.J.-based specialty pharmaceutical company, planned to sell $100 million of six-year convertible senior notes after the market close Wednesday.

The bonds are non-callable for four years and then are provisionally callable subject to a 130% price hurdle to the conversion price. There is standard takeover and dividend protection, and there is a coupon make-whole feature.

About $30 million of proceeds will be used to repay amounts outstanding under the company's senior secured credit facility, with the remainder of the proceeds to fund continued commercialization of Exparel, a long-acting, non-opioid postsurgical analgesic for postsurgical pain management, the development of additional indications for Exparel and for general corporate purposes.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Gilead Sciences Inc. Nasdaq: GILD

InterMune Corp. Nasdaq: ITMN

Kinross Gold Corp. NYSE: KCG

Lennar Corp. NYSE: LEN

Medtronic In. NYSE: MDT

Pacira Pharmaceuticals Inc. Nasdaq: PCRX

Transocean Ltd. NYSE: RIG

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.