Convertibles see better bidders; Impax up outright with FDA news; Dycom, Stericycle on tap

By Rebecca Melvin

New York, Sept. 8 – U.S. convertibles were moving higher on an outright basis and mostly in line on a hedged basis with higher equities on Tuesday to start the holiday-shortened work week following Labor Day. U.S. financial markets were closed on Monday.

The convertibles market was not yet in high gear following the holiday weekend that marks the end of the slower summer months, but there was new issue activity that portends a more significant pickup in activity. Outside of a deal here or there, the new issue market was essentially shuttered in July and August.

Tuesday’s secondary market was “better to buy,” meaning there were more bidders in the market and generally nebulous offers, a New York-based trader said. But it was still “pretty slow as guys return from holiday.”

The trader said the market was pretty firm but there was no pattern developing as yet.

A Canadian new deal got his attention during the session, and he expected the U.S. pipeline to be robust this week and next.

In Canada, Emera Inc. agreed to sell C$1.9 billion of 4% 10-year convertible subordinated debentures in a secondary offering on a bought-deal basis, the proceeds of which would be used to help fund its planned acquisition of TECO Energy Inc., the Tampa, Fla.-based energy-related holding company and utility, for $10.4 billion.

In the United States, Dycom Industries Inc. launched an offering of $400 million of six-year convertible senior notes after the market close. Pricing of the Rule 144A Dycom deal was expected to occur after the market close on Wednesday. And Stericycle Inc. planned to price $700 million of series A mandatory convertible preferred stock at the same time.

Back in secondary action, Impax Laboratories, Inc.’s 2% convertibles due 2022 were up 3 points to almost 99 at late morning, according to Trace data, as the common stock of the Hayward, Calif.-based specialty pharmaceutical company jumped 10% in response to positive FDA news.

Impax said it received written notice from the FDA that the company has successfully addressed issues raised in a 2011 warning letter related to its manufacturing facilities in Hayward.

“With the resolution of the warning letter, we are excited about the potential for approvals and launches of new products from this facility,” president and chief executive Fred Wilkinson said in a news release. Wilkinson also said that the company expects results to remain within the ranges of its previously issued guidance for full-year 2015.

Impax shares finished up $4.85, or 12%, to $45.16.

Priceline Group Inc.’s convertibles were up a point or two on an outright basis, and several series of the SunEdison Inc. convertibles improved including the SunEdison 6.75% convertibles that priced in August. That deal was seen at 93.8, which was up from 88.9, according to a pricing source.

A few energy names traded. Whiting Petroleum Corp.’s 1.25% convertibles due 2020 were at 85, with the underlying shares of the company down about 1%. But the Whiting shares pared losses to end in positive territory by a few cents at $18.58.

Chesapeake Energy Corp.’s 2.5% convertibles due 2037 were up 1.375 points to 90, according to Trace data, with the common stock of the Oklahoma City-based energy company up more than 6%. And Peabody Energy Corp.’s 4.75% convertibles, which are severely distressed, were seen changing hands at 15, with the underlying stock up about 1%. But Peabody’s shares reversed gains to end down 3 cents, or 1.3%, at $2.25.

In the biotech sphere, Acorda Therapeutics Inc.’s 1.75% convertibles due 2021 traded at about 101. Shares of the Ardsley, N.Y.-based biopharmaceutical company moved higher in trade on Tuesday, ending up $1.65, or 5%, at $33.36.

Tuesday’s move took the Acorda shares beyond where they were trading before their mid-August slump on fears of drug-patent challenges.

The patent challenge of its multiple sclerosis treatment Ampyra by Hayman Capital Management was dismissed by a U.S. patent review broad at the end of August. Haymon’s Kyle Bass refiled challenges against Acorda on Wednesday, but also on Wednesday, a patent panel declined to review Bass’s challenge to Biogen Inc.’s multiple sclerosis pill Tecfidera patent.

Dycom to price deal

Palm Beach Gardens, Fla.-based Dycom, a provider of specialty contracting services, launched an offering of $400 million of six-year convertible senior notes that were talked to yield 0.5% to 1% with an initial conversion premium of 27.5% to 32.5%.

The non-callable notes were being sold via joint bookrunners Goldman Sachs & Co. and BofA Merrill Lynch.

Proceeds of the deal will be used to redeem Dycom’s 7.125% senior subordinated notes due 2021, to repurchase $50 million of Dycom common stock and to pay the cost of a call spread.

In connection with the pricing of the notes, Dycom has authorized the repurchase of up to $75 million of its common stock in privately negotiated transactions or in open market transactions and intends to use a portion of the proceeds to refund the repurchase.

Stericycle to price

Lake Forest, Ill.-based Stericycle, a provider of medical waste collection, transportation, treatment and disposal services and safety and compliance programs, launched an offering of $700 million of series A mandatory convertible preferred stock that was seen pricing after the market close on Wednesday.

The deal was talked to yield 5% to 5.5% with an initial conversion premium of 20% to 25%, according to a syndicate source.

Proceeds of the registered, off-the-shelf deal are earmarked to finance the company’s previously announced acquisition of all of the equity interests in Shred-it International ULC, Shred-it JV LP, Boost GP Corp. and Boost Holdings LP, including the payment of related fees and expenses.

BofA Merrill Lynch, Goldman Sachs and J.P. Morgan Securities LLC are joint bookrunning managers of the deal.

Unless earlier converted or redeemed each mandatory will automatically convert into a variable number of common shares on Sept. 15, 2018.

The mandatory deal is not contingent on completion of the acquisition. If the acquisition is not completed by Jan. 15, 2016, the company has the option to redeem the mandatories.

Mentioned in this article:

Acorda Therapeutics Inc. Nasdaq: ACOR

Chesapeake Energy Corp. NYSE: CHK

Dycom Industries Inc. NYSE: DY

Emera Inc. Toronto: EMA

Impax Laboratories Inc. Nasdaq: IPXL

Peabody Energy Corp. NYSE: BTU

Priceline Group Inc. Nasdaq: PCLN

Stericycle Inc. Nasdaq: SRCL

SunEdison Inc. Nasdaq: SUNE

Whiting Petroleum Corp. NYSE: WLL

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