DexCom, Kaman, Becton Dickinson enter market; Horizon falters as guidance lowered; Cobalt up

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 were expected to price after Monday’s close, but details were not available as of 6:30 p.m. ET.

Ahead of pricing, DexCom’s stock was off $2.81, or 3.69%, at $73.40. Kaman, however, was up, adding $5.20, or 11.06%, to close at $52.21.

Meanwhile, Becton, Dickinson & Co. said it was selling $2.25 billion of mandatory convertible preferred stock.

Price talk is for a yield of 6% to 6.5% with an initial conversion premium of 17.5% to 22.5%.

That deal is slated to come after Wednesday’s close.

Citigroup Global Markets Inc., JPMorgan, Morgan Stanley & Co. LLC, MUFG, BNP Paribas Securities Corp., Barclays and Wells Fargo Securities LLC are running the books.

Like DexCom, Becton’s shares faltered, sliding $2.78, or 1.5%, to $182.62.

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 buyback – and that’s the end of the good news,” the trader said.

“They overrode the stock buyback with the revised guidance,” the trader said, adding that the revision declined by about $200 million.

Horizon paper slides

Horizon Pharma’s 2.5% convertibles were in retreat on Monday amid a flurry of headlines.

A 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.

One market source saw the issue trading just north of 85, which was down 9.5 points on the day.

Another trader saw the paper at 80.875, off 14 points.

The notes were pegged at 81.5 in mid-morning trading. That compared to previous trades closer to 95.

As for the underlying stock, it waned $5.46, or 35.04%, to $10.12.

For the first quarter, the Dublin, Ireland-based company reported adjusted earnings per share of 21 cents on revenue of $220.9 million.

While revenue was up 8% year over year, adjusted EPS was off 16%.

Analysts polled by FactSet had forecast adjusted EPS of 23 cents on revenue of $248.1 million.

Horizon also noted that it had agreed to buy River Vision Development and its development-stage medicine teprotumumab (RV001) for $145 million.

The deal also includes future milestone and earn-out payments.

But while the market might have been able to get over the earnings miss – and seen benefit in the new acquisition – a downward revision in net sales guidance for the year was the icing on the cake.

The new sales guidance is $1 billion to $1.035 billion, down from $1.24 billion to $1.29 billion previously.

Adjusted EBITDA guidance was also lowered, to between $315 million to $350 million.

Previous EBITDA forecasts were between $525 million to $575 million.

Cobalt future in question

Unlike Horizon, Cobalt International Energy Inc.’s convertible debt was unchanged to better, despite its own earnings miss.

The company also warned that it would need “substantial additional funding.”

At one desk, the 2.625% convertible notes due 2019 were seen at 36, up nearly 4 points on the session.

At another desk, the convertibles were also placed around the 36 level, as the 3.125% convertible notes due 2024 traded in a 23 to 24.75 range.

The latter bonds were about unchanged for the day.

The oil and gas company posted a loss of 69 cents per share. Analysts polled by Thomson Reuters had expected earnings per share of 13 cents.

The company also said that it expects capital expenditures to run about $250 million for the year. Cash outlays are projected between $500 million and $600 million, of which $196 million had already been spent as of March 31.

However, during its conference call, company management said that capital and operating costs would “vastly exceed” its revenue expectations. Therefore, its ability to continue as a going concern depends on whether or not it can monetize assets, obtain financing or refinancing and continue its cost-cutting efforts.

Mentioned in this article:

Becton, Dickinson & Co. NYSE: BDX

Cobalt International Energy Inc. NYSE: CIE

DexCom Inc. Nasdaq: DXCM

Horizon Pharma plc Nasdaq: HZNP

Kaman Corp. NYSE: KAMN

© 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.