Morning Commentary: Planned Invacare looks cheap; Priceline 0.9% convertibles contract

By Rebecca Melvin

New York, Feb. 17 – A new issue launched by Invacare Corp. for $130 million of convertible senior notes was getting the once over early Wednesday and valued very cheap at the midpoint of price talk.

The Invacare deal, which was expected to price after the market close on Wednesday, was seen at a fair value of 106 at the midpoint of talk, using a credit spread of 900 basis points over Libor and a 40% vol., a New York-based trader said.

“It’s cheap; but it had to price cheap in this Tape,” the trader said. He also noted that it “has a limited audience. But it will get the hedge guys that play the model game.”

Invacare is an Elyria, Ohio-based maker of non-acute health care products, and its new deal represents the convertible market’s third new issue this year – all of which have been in the health care space. The other two new issues of the lagging primary market were KemPharm Inc.’s $86.25 million of 5.5% convertibles due 2021 and Novavax Inc.’s $325 million of 3.75% convertibles due 2023.

Back in established issues, Priceline Group Inc.’s convertibles were trading actively, with the Priceline 0.9% changing hands up almost 3 points on an outright basis at 100.25 but contracting on a dollar-neutral, or hedged, basis by about 0.75 point, depending on the delta on which the bonds were held, the New York-based trader said.

Priceline shares were up about 11% at $1,229.84 at late morning after the Norwalk, Conn.-based travel site reported better-than-expected fourth-quarter earnings and guided current earnings at the high end of consensus estimates.

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