Global Industries surges on takeover offer; Hornbeck up 2-3 points; Clearwire weakens

By Rebecca Melvin

New York, Sept. 12 - Global Industries Ltd. was the name of the day in the convertible bond market on Monday, with pricing on the bonds surging more than 30 points outright along with skyrocketing shares after news of a takeover offer for the Carlyss, La.-based offshore oil and gas drilling contractor.

"GLBL is where it's at today," a New York-based sellside trader said.

The Global Industries convertibles soared to 96 from 62 and dominated volume in the market.

The Global takeover news maybe had some spillover effect on other energy names as one market player mentioned that Hornbeck Offshore Services Inc.'s convertibles were up 2 points to 3 points. But other market players didn't concur.

"It was pretty quiet otherwise," one trader said, calling attention to the fact that Hornbeck shares didn't react very positively early Monday.

Clearwire Corp. dropped sharply on a 50-cent stock move lower from last Thursday. That paper was left 59 bid, 62 offered after a trade went off at 61.5 versus an underlying share price of $2.55. That price compared to 67 versus a share price of $3.00 last Thursday.

Late in the day, there was more activity, mostly in big, liquid names like EMC Corp., Amgen Inc. and Gilead Sciences Inc.

The Gilead 1.625% 'D' convertibles were up 2.5 points from last Thursday.

The late moves in convertibles may have been related to the late rally in equities.

"There were indications that there were some buyers in our market and in the general equity market as the day went on, and it looked like it was overdone," a New York-based trader said.

"But I'm not sure what to make of it all; it was a strange day. We spent the whole day lower and then got this pop on the Chinese and Italy headline," the trader said.

The trader was referring to the stock markets, which were solidly lower for much of the session on concerns about a possible default of Greek debt, but then pushed higher in a late afternoon rally. Traders said the reversal was on reports that China planned to buy a significant amount of Italian debt.

In the primary arena, InterMune Inc. launched a $100 million offering of seven-year convertible bonds after the market close that was seen pricing after the market close Tuesday.

Global Industries surges

Global Industries' 2.75% convertible bonds due 2027 traded at 96 on Monday, up from about 62 on Friday.

Global Industries' shares surged 51%, or $2.63, to $7.78.

One trader said trading in Global Industries accounted for close to 50% of the day's volume in convertibles.

The convertible was "busted,"' or not reactive to the underlying shares, before the news that the company has received a takeover offer from French competitor Technip SA for $8.00 per share.

Because it was a credit name and not going to trade along with moves in the stock, it was not considered a hedged name.

Nevertheless, "we if you were hedged, you made 30 points," one sellsider said.

Most of the big holders were outright and included a mix of credit funds and asset managers. There were a few in convert hedge funds, sources said.

"But there's very little delta," a trader said, explaining there was no delta before the news because the convertibles were busted, and there was very little delta after the news because there was little stock upside left.

"Risk arb guys are now playing it, but it is not really stock sensitive," the trader said.

Both Global Industries and Technip provide services such as construction and project management for offshore oil and gas exploration.

Technip would pay $8.00 per share in cash for Global, a 55% premium to its Friday closing price of $5.15.

Technip would pay about $937 million and also assume $136 million of debt.

Global Industries has been a loss maker for most of the last three years. Last month it cited a downturn in the marine industry and low project activity worldwide for its poor results.

Technip said it expects Global Industries to add 5% to 7% to its per-share earnings in 2013, save on costs of redundant services, and position the company to lead the subsea market for oil producers.

The companies said they expect the purchase to close early next year, pending approval from regulators and Global's shareholders.

Global Industries priced its $325 million of 2.75% convertibles in July 2007.

Gilead Ds higher

Gilead Sciences' 1.625% convertibles due 2016 traded at 112 versus an underlying share price of $37.25 on Monday, up from 109.5 versus an underlying share price of $39.55 last Thursday.

Shares of the Foster City, Calif.-based biopharmaceutical company ended higher by 17 cents, or 0.44%, at $37.98 on Monday.

The Gilead issues were actively traded on Monday. There are also two other Gilead convertible issues, and they all trade on both a hedged and outright basis.

"They are boring," one trader said of the Gilead convertibles. "They might do something if [the] stock moves higher, but these bonds are in the money and not terribly interesting."

InterMune to price

InterMune said it plans to sell $100 million of seven-year convertible bonds after the market close Tuesday. The paper was talked at a yield of 3.25% to 3.75% with an initial conversion premium of 27.5% to 32.5%, according to a syndicate source.

Concurrently, InterMune plans to sell 4 million common shares.

The registered notes have a $15 million greenshoe.

The securities are being sold via joint bookrunners Goldman Sachs & Co. and J.P. Morgan Securities LLC.

The notes are non-callable until Sept. 20, 2015 and then are provisionally callable subject to a 130% price hurdle.

Proceeds will be used to fund the commercial launch of InterMune's Esbriet drug in the European Union, to fund its Ascend trial and for general corporate purposes.

Brisbane, Calif.-based InterMune is a biotech concern focused on treatments for pulmonary, infectious and hepatic diseases.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

EMC Corp. NYSE: EMC

Clearwire Corp. Nasdaq: CLWR

Gilead Sciences Inc. Nasdaq: GILD

Global Industries Ltd. Nasdaq: GLBL

Hornbeck Offshore Services Inc. NYSE: HOS

InterMune Inc. Nasdaq: ITMN

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