Planned Medicines’ $350 million deal looks ‘fair’; Weatherford expands; Nevro on tap

By Rebecca Melvin

New York, June 6 – The Medicines Co. was in focus in U.S. convertibles on Monday after the Parsippany, N.J.-based health care company launched an offering of $350 million of seven-year convertible senior notes ahead of the market open for pricing after the market close.

The new Medicines deal did not look particularly cheap from an investor’s perspective and was seen “fair at best,” according to a New York-based trader.

A portion of the proceeds will be used to repurchase about $220 million of Medicines’ existing 1.375% convertible notes due 2017. The older bonds, which are being tendered in privately negotiated transactions, were not heard to have traded in early action. But later, they changed hands little changed at 143.25 to 144.

But the Medicines’ 2.5% convertibles due 2022 traded actively, although little changed on a dollar-neutral, or hedged, basis, according to a second trading source.

Medicines shares ended the session down 23 cents, or 0.6%, at $36.96.

Elsewhere Weatherford International Ltd.’s $1.1 billion of 5.875% exchangeables, which debuted in the market last week, were up again in good volume on Monday, as shares continued to rise. Investors have cheered the company’s decision to restructure last week through the exchangeable.

The Weatherford exchangeable spurted up another 5 points or so, changing hands at 116.625 early Monday with shares at $6.50. Later, the new paper was quoted at 117.875 bid, 118.125 offered versus an underlying share price of $6.63.

That was better by about 0.75 point on a swap basis, a New York-based sellsider said.

Also in the energy space, Chesapeake Energy Corp.’s convertibles surged as oil prices rose on Monday, helping drive up shares of the Oklahoma City-based oil and natural gas company.

Chesapeake’s 2.25% convertibles traded up 3 points to 80 and the Chesapeake Energy 2.5% convertibles traded up a touch to 93, a Connecticut-based trader said.

But Cobalt International Energy Inc.’s convertibles were lower amid some negative news related to Angola, where the company has operations, the trader said.

Cobalt’s 3.125% convertibles due 2024 were last at 37.75, which was unchanged from Friday’s levels despite higher shares. The Cobalt 2.625% convertibles due 2019 were 42 compared to 41.25 last on Friday.

Meanwhile, Immunomedics Inc. shares continued to slide, dropping another 14% on Monday after a 16% fall on Friday on news that the company’s presentation for the American Society of Clinical Oncology was cancelled because of a complaint the company violated an embargo on reporting results.

The 4.75% convertibles of the Morris Plains, N.J.-based biopharmaceutical company were indicated down another 10 points to 93.4 from 103.4 on Friday and from nearly 116 previously, according to a pricing source.

After the market close, Nevro Corp. launched a deal for $125 million of five-year convertible senior notes that was seen pricing late on Tuesday.

Shares of the California-based medical device maker remained unchanged in after-hours action.

Medicines in focus

Medicines launched an offering for $350 million of seven-year convertible senior notes, which were supposed to price after the market close. Proceeds of the new deal are expected to take out a good portion of the company’s existing 1.375% convertibles. That paper was quiet as negotiations with holders were presumably underway.

The company’s 2.5% convertibles didn’t budge either on a dollar-neutral basis, a trader said.

The 2.5% bond maturing 2022 was quoted at 128.675 versus an underlying share price of $37.89 at late morning. Later in the session, they were seen at 126 bid, 126.75 offered against a share price of $36.96. Last week those notes went out at 124.75, according to Trace data. But they had been 128 on Thursday.

The notes have a 5.6-year maturity and are non-callable for 2.6 years.

Medicines shares were up nearly 1% at late morning but ended the session down 0.6%.

The new issue of convertible senior notes was talked to yield 2.5% to 3% with an initial conversion premium of 27.5% to 32.5%. The Rule 144A deal was being marketed via Goldman Sachs & Co. and J.P. Morgan Securities LLC as joint bookrunners, and the deal has a $52.5 million greenshoe.

The notes are non-callable for four year and then provisionally callable if shares exceed 130% of the conversion price. There are no investor puts. There is takeover and dividend protection.

A portion of the proceeds will be used to repurchase about $220 million of Medicines’ 1.375% convertible notes due 2017. The price of the 2017 notes repurchased will be subject to individual negotiations with each holder of the notes. Proceeds may also be used to purchase additional 2017 notes from time to time following the pricing of the notes.

In connection with the pricing of the notes, the company expects to enter into capped call transactions with one or more of the initial purchasers or affiliates or other financial institutions. A portion of the proceeds will be used to pay the cost of the capped call transactions.

Remaining proceeds are earmarked for general corporate purposes, including working capital and research and development expenditures.

Parsippany, N.J.-based Medicines develops products that improve specialized care.

Weatherford extends gains

The new Weatherford exchangeable that priced late last week expanded another 0.75 point on Monday with the paper moving up 5 points on an outright basis.

The shares gained 51 cents, or 8%, to $6.63. On Friday, the Weatherford exchangeables ended the week near 112.

The Weatherford exchangeables remained actively traded.

The registered, off-the-shelf deal was initially talked at $1 billion in size. The greenshoe was upsized to $165 million from $150 million.

Final terms were mixed compared to price talk, coming at the cheap end of 5.625% to 5.875% rate talk and at the rich end of 37.5% to 40% premium talk.

Nevro to price

Nevro plans to price $125 million of five-year convertible senior notes in a registered deal after the market close on Tuesday and talked to yield 1.75% to 2.25% with an initial conversion premium of 27.5% to 32.5%, according to market sources.

Proceeds will be used to fund the net cost of the call spread and to repay an existing term loan agreement, including associated closing and repayment fees with Capital Royalty Partners and certain affiliates. Any remaining proceeds are for general corporate purposes, which many include continuing commercialization of its Senza spinal cord stimulation product, funding research and development and increasing working capital.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the joint bookrunners for the offering, for which there is a greenshoe for up to an additional $18.75 million of notes.

The notes are non-callable with no puts and mature on June 1, 2021. There is takeover and dividend protection and net share settlement.

In connection with the offering of the notes, Nevro expects to enter into privately negotiated convertible note hedge and warrant transactions, or a call spread.

Redwood City, Calif.-based Nevro is a medical device company focused on chronic pain treatments.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Cobalt International Energy Inc. NYSE: CIE

Immunomedics Inc. Nasdaq: IMMU

Medicines Co. Nasdaq: MDCO

Nevro Corp. Nasdaq: NVRO

Weatherford International plc NYSE: WFT

© 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.