Nabors gains on buyout rumors; ImClone flat; Amkor climbs with credit; Priceline.com gains on tender

By Kenneth Lim

Boston, Oct. 10 - The convertible bond market came back to life on Tuesday, with Nabors Industries Ltd. raising eyebrows as volume surged amid speculation that a leveraged buyout may be in the works.

ImClone Systems Inc. was mostly unchanged despite gains in its stock, which rallied on news that the company's chairman and another board member resigned amid pressure from shareholder Carl Icahn.

Amkor Technology Inc.'s convertibles improved after credit ratings were raised following the company's curing of its defaults. Amkor's 5% convertible due March 2007 inched closer to par, at 98.75 against a stock price of $6.75, while the 2.5% convertible due 2011 gained about a point outright to change hands at 84.25 versus the same stock price.

Amkor stock (Nasdaq: AMKR) closed at $6.71, lower by 0.74% or 5 cents.

"The Amkors are still active," a sellsider said. "The stock continues to be volatile, and the credit has obviously improved since it submitted its filings."

Chandler, Ariz.-based Amkor on Oct. 6 submitted its delayed financial reports and averted potential claims of default on its various debt securities. The semiconductor test and assembly company restated results for the past several years after an internal investigation found that some stock options dates had been manipulated. The company terminated its consent solicitation after it filed the results, saying it had cured the alleged defaults on the debts.

SafeNet up on possible repayment

SafeNet Inc.'s 2.5% convertible due 2010 was also slightly better outright after an announcement suggested that the company could let holders accelerate the convertible amid filing delays.

The convertible was marked at 94 bid, 95 offered against the closing stock price of $20.45. SafeNet stock (Nasdaq: SFNT) gained 1.94% or 39 cents.

Belcamp, Md.-based SafeNet said Tuesday that it has to further delay the filing of its financial report for the quarter ended June 30, 2006. The information security company said it now expects to file the report during the current quarter, after initially guiding for an "early October" submission.

SafeNet also said it expects to receive a notice of acceleration from Citibank, the trustee of the $250 million convertible series. The company stated that it will have net cash of $70 million and no debt if it elects to pay the $253 million required to accelerate the notes. It will also incur non-cash charges of $5 million. SafeNet added that it currently estimates cash flow from operations of approximately $25 million for the six months ended June 30, 2006.

"It's still somewhat ambiguous, but the press release suggested that the company will allow the bonds to be accelerated," a sellside convertible bond strategist said.

Priceline up on exchange

Priceline.com Inc.'s older convertibles jumped after the company offered to exchange them for new paper that have net-share settlement and premium make-whole features. A cash sweetener was also offered for holders of the longest-dated 2.25% notes due 2025.

The 2.25% convertible was marked at 123.5 bid, 124.5 offered against a stock price of $39.37, about two points above week-ago levels. Priceline.com stock (Nasdaq: PCLN) closed at $39.43, up by 0.79% or 31 cents.

"Priceline stock just hit a 52-week high, the stock's up on domestic airline news and they've got revenue coming from international airlines, car rentals, hotels," a convertible bond trader said. "I feel like it's an improving credit where the stock continues to move around. They model cheap."

Priceline.com on Tuesday offered holders of its outstanding 2.25% convertible $2.50 per $1,000 principal plus new notes that are substantially the same, except that the new securities have a net-share settlement feature that will let the company account for them using the treasury stock method. For holders of Priceline.com's outstanding 1% convertibles due 2010, Priceline.com is offering new notes that are also substantially the same except that the new convertibles have net-share settlement and a premium make-whole in the case of a change of control.

Norwalk, Conn.-based Priceline.com, an online travel company, said in September that it planned to tender for all the 2.25% and 1% convertibles.

Nabors gains on buyout rumors

Nabors' 0.94% convertible due 2011 climbed about 2 points outright on Tuesday amid rumors that the company may be the target of a leveraged buyout.

The convertible changed hands at 95.25 versus a stock price of $29.75. Nabors stock (NYSE: NBR) climbed 7.41% or $2.08 and ended the day at $30.16.

"The stock's up today, there's a rumor that the company's going to do an LBO," a sellsider said. "I don't know if it's true."

Indeed, while the speculation made its rounds on the Street, analysts and traders did not know if there was any truth to the rumors. Representatives from Nabors could not be reached for comment.

"It's speculation to say that management has a low stock price in their minds," said a buyside convertible bond analyst who had also heard the rumors. "They're savvy financial guys, they're probably out talking to lots of different parties. It's not materially different from any other cheaply valued stock."

Although the buysider did not know how much truth was in the rumor, the analyst noted that Bermuda-headquartered Nabors is a large company and a leveraged buyout could be quite a handful.

"It's a lot to handle, it's well into the teens in billions of dollars if you're talking about an LBO," the buysider said.

"My sense is that there is not major LBO talk," the buysider said.

A sellside convertible bond analyst said investors are more open to the possibility of a large-scale leveraged buyout these days after the massive offer for Harrah's Entertainment Inc. recently.

"We've heard these rumors, but with different names, from time to time," the analyst said. "Three months ago people didn't think a lot about these, but after Harrah's they're giving it another hour of thought."

The analyst said it was not very far-fetched to think that Nabors, a land drilling contractor, may be the target of a buyout.

"I can see why people may speculate on this, because the company is always mentioned as one of the cheaper names in the oil services sector," the analyst said.

How the convertibles will be affected if there were a leveraged buyout would depend on where the stock price ends up, the analyst said. In the meantime, the movements in the stock have benefited the convertibles.

"The bonds are actually better with the volatility," the analyst said.

ImClone rallies with stock

ImClone's 1.375% convertible due 2024 was flat at 90 against a stock price of $21.90 on Tuesday after the company's chairman and another board member resigned.

ImClone stock (Nasdaq: IMCL) rose 3.98% or $1.19 to close at $31.09.

"This is good for Icahn, and I think shareholders are hoping that the company will get better directors or the existing directors will feel more pressure to get something done," a sellside convertible bond trader said. "Nothing's really changed for the credit."

David M. Kies resigned as ImClone's chairman and William W. Crouse quit as a board member on Tuesday. Kies said he was leaving for personal and other reasons.

Their resignation comes amid efforts by billionaire investor Carl Icahn to remove half of ImClone's 12-member board, including Kies and Crouse.

ImClone is a New York-based drugmaker whose only drug, Erbitux, is used as a cancer treatment.

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