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Morning Commentary: DexCom, Kaman, Becton Dickinson plan to tap market; Horizon falters
By Stephanie N. Rotondo
Seattle, May 8 – The new week kicked off with a bevy of new deals being added to the convertible bond calendar.
“A good day for converts,” a trader said.
DexCom Inc. and Kaman Corp. both announced plans for Rule 144A offerings.
DexCom, for its part, is selling $300 million of five-year paper, and Kaman is offering $175 million of seven-year notes.
Price talk on the DexCom offering is for a 0.75% to 1.25% yield and a 30% to 35% initial conversion premium. The Kaman deal is being talk with a 3.25% to 3.75% yield and an initial conversion premium of 25% to 30%.
J.P. Morgan Securities LLC and BofA Merrill Lynch are participating in both transactions, with UBS Securities LLC added to the Kaman deal.
Both of those deals are expected to price after Monday’s close.
Meanwhile, Becton, Dickinson & Co. said it was selling $2.25 billion of mandatory convertible preferred stock.
Price talk is 6% to 6.5% with an initial conversion premium of 17.5% to 22.5%.
Citigroup Global Markets Inc., JPMorgan, Morgan Stanley & Co. LLC, MUFG, BNP Paribas Securities Corp., Barclays and Wells Fargo Securities LLC are running the books.
Aside from eyeing the new issue calendar, convertible debt investors were also zeroing in on Horizon Pharma plc’s 2.5% convertible notes due 2022.
A trader said the convertibles were “moving around” on “a plethora of headlines.”
“They announced a 10% stock buy-back – and that’s the end of the good news,” the trader said.
The trader noted that in addition to reporting earnings – and “dramatically” lowering its guidance – the company also said it was acquiring River Vision Development Corp. for $145 million.
“They overrode the stock buyback with the revised guidance,” the trader said, adding that the revision declined by about $200 million.
The notes were pegged at 81.5 in mid-morning trading. That compared to previous trades closer to 95.
As for the underlying stock (Nasdaq: HZNP), it was down about 30% in early trading.
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