Intel launches $1.4 billion convertible offering; Omnicare to price; MedImmune edges up

By Rebecca Melvin

Princeton, N.J., Dec. 12 - News that perked up the convertible market on Monday came after the bell when Intel Corp. launched a $1.4 billion convertibles offering, which was seen pricing late Tuesday.

Otherwise, trading in the secondary convertible market was fairly light on Monday, with players buying some energy names, such as Chesapeake Energy Corp. and Nabors Industries Ltd., as crude oil prices rose to their five-week high.

There was also some upside activity in a few technology names, a trader said. But the auto sector was weak, with General Motors Corp. edging lower as did auto parts supplier Lear Corp.

In the biotechnology space, the convertibles of MedImmune Inc. traded higher by about 0.25 point outright, but the paper was little changed on a hedged basis after the Gaithersburg, Md.-based company announced data showing that a more convenient form of its flu spray was more effective than a flu shot.

Tyco International Ltd. continued to see activity, which one trader said was related to recent news that the Bermuda-based diversified company was buying back bonds.

Recent new issues were also mentioned in trade, including two issues that priced Wednesday: XL Capital Ltd., which priced $745 million of mandatory convertibles at par of $25 to yield 7%, and SafeNet Inc., which priced $225 million of five-year convertibles to yield 2.5%.

Back to the primary market, traders were looking to Omnicare Inc. to perk up Tuesday's session when the Covington, Ky.-based drug-services provider for the elderly was to release $750 million of 30-year convertibles to the market after pricing late Monday.

Intel launches $1.4 billion convertibles

Intel plans to price $1.4 billion of 30-year convertibles, which were talked to yield 2.875% to 3.125% with an initial conversion premium of 18% to 20%, according to market sources, who saw the terms as "pretty attractive," with a gray market at 100 7/16 to 101 3/16.

The convertibles are non-callable for seven years and provisionally callable after that at a trigger of 130%. There are no puts, which detracts from the deal, one buyside source said.

The convertibles, which have a $1,000 par, also have dividend and takeover protection.

The Rule 144 A deal being sold via bookrunner JP Morgan was seen pricing after the close on Tuesday.

Santa Clara, Calif.-based Intel is a semiconductor company.

Omnicare looks 2.5% cheap at the mids

There was no gray market in the Omnicare deal, which was talked to yield 3.125% to 3.625%, with an initial conversion premium of 32.5% to 37.5%.

The deal, sold via joint bookrunners JP Morgan, Lehman Brothers and CIBC World Markets, was seen 2.5 points cheap at the midpoint of talk using a credit spread of Libor plus 275 basis points and 25% volatility, a Connecticut-based buysider said Monday.

SunTrust Robinson Humphrey, Wachovia Securities and Merrill Lynch are acting as co-managers for the convertibles, which are non-callable for 10 years and have a put in year 10.

Concurrently with the convertibles offering, the company is offering $750 million of straight debt in a two-part offering and 12,825,000 shares of common stock, not including the underwriters' option to purchase additional shares. The three offerings are conditioned on each other.

The straight debt, in the form of senior subordinated bonds, included eight-year notes talked to yield 6.75% and 10-year notes talked to yield 7%.

A portion of the proceeds from the offerings will be used to repay the company's $1.9 billion 364-day loan facility. Remaining net proceeds will be used to repurchase all outstanding $375 million principal amount of its 8.125% senior subordinated notes due 2011.

GM bonds move lower

The GM 5.25% convertible bonds closed down 0.26 point, or 1.65%, to 15.45, while its two sister issues, $25 par bonds, edged lower amid news from the big automaker that didn't particularly faze the market.

Late Friday, GM and billionaire investor Kirk Kerkorian's Tracinda Corp. announced that they were not able to strike an agreement in giving a Kerkorian associate a seat on the automaker's board.

"Despite constructive discussions," the companies said in a joint statement, they were unable to reach a "mutually satisfactory agreement" to give Jerry York, a former Chrysler chief financial officer and close associate to Kerkorian, a seat.

Late Monday, S&P lowered its credit rating on GM to B from BB- and its short-term debt rating to B-3 from B-2. It also removed the ratings from CreditWatch, where they were placed on Oct. 3 with negative implications.

The downgrade reflected increased skepticism that GM will be able to mount a turnaround of its North American automotive operations, S&P said in a release. And if current trends persist, GM could ultimately need to restructure its obligations, despite its currently substantial liquidity and management's statements that it has no intention of filing for bankruptcy.

S&P said the BB/B-1 ratings on General Motors Acceptance Corp. and the BBB-/A-3 ratings on Residential Capital Corp. remain on CreditWatch with developing implications, reflecting a potential sale of a controlling interest in GMAC to a highly rated financial institution.

A New York-based sellside analyst said that the rating agency news had already been priced into the GM securities for the most part. "The rating agencies lag behind what the market already says. All that being said, it is a negative."

GM shares closed the session up 13 cents, or 0.57%, at $23.05.

MedImmune edges higher

The convertibles of MedImmune Inc. edged higher as its shares gained 4.5%, after the company said that preliminary data from a phase 3 study indicated that CAIV-T, or cold adapted influenza vaccine, trivalent, showed a 55% reduction in influenza illness caused by any flu strain compared to the injectable flu vaccine.

The influenza attack rate was 3.9% for those taking the investigational refrigerator version of FluMist, compared to 8.6% for study participants taking the shot.

Currently FluMist, a frozen vaccine, is approved to prevent flu in healthy children and adolescents, 5 to 17 years of age, and healthy adults, 18 to 49 years of age. The trial is pivotal trial is the third phase 3 trial of a more convenient version of the medication to show statistically significant reductions in influenza disease compared to the injectible flu vaccine.

MedImmune's 1% convertibles traded up about 0.25 point outright but barely budged on a hedged basis. It traded at 97.75 versus a stock price of $34.25. It also traded at 97.50. On Friday the convertibles looked to be 97 bid, 97.50 offered, according to a New York-based sellside shop.

MedImmune shares closed up $1.55, or 4.5%, at $35.71.

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