Interpublic slips in active trade on call; Salesforce.com active, lower; Savient weakens

By Rebecca Melvin

New York, Feb. 24 - The 4.5% convertibles of Interpublic Group of Cos. Inc. were heavily traded Friday at pricing that was slightly lower than previous levels after the New York-based advertising group said it is calling the outstanding convertibles due 2023 at the end of March.

In addition Interpublic posted better-than-expected quarterly profit on returns from its digital investments and growth in emerging markets and unveiled a new $300 million stock buyback program.

Salesforce.com Inc.'s convertibles were also trading actively and slightly lower after the San Francisco-based cloud computing company posted positive earnings.

Not much was trading of the Endo Pharmaceuticals Holdings Inc. convertibles after the specialty drug maker beat estimates with its fourth-quarter earnings and posted revenue that was line with expectations, but guidance for the current year was below estimates.

Savient Pharmaceuticals Inc. traded a little lower at 43.75 to 44, compared to the previous level of the biopharmaceutical company's 4.75% convertibles at 45 bid, 46 offered, a New York-based trader said.

Meanwhile, James River Coal Co.'s 4.5% convertibles due 2015 slumped into the middle 60s from the low 70s on a big outright seller, a New York-based sellsider said.

Overall, "Interpublic Group and Salesforce.com were the big names on the tape. Kodak was also better on the tape and Alcoa traded, and other than that it was the usual crowd," a trader said.

For the day and for the week there were no conclusive trends that could be drawn, traders said.

"I don't think there's any meaning that can be concluded," one sellsider said.

In equities, the S&P 500 stock index inched higher to close at its highest level since the market collapse. It added just 2 points to 1,365.74. The Dow Jones industrial average ended just below the flat line.

Interpublic Group slips

Interpublic's 4.25% convertibles due 2023 were trading heavily in the convertible market on Friday in a narrow range of 100.25 to 100.75. It had been trading a little higher at 101.125 prior to news about the call.

"People were somewhat expecting it," a New York-based trader said of the call. "But maybe coming into earnings, people were starting to take a little bet."

Doubts about the call had started to creep in because it was a week gone since a 30-day window had started to signal that the company could redeem the paper, he explained.

A second sellsider said that he expected that the flow of trades was away from outright sellers and into the hands of hedged players, who will play the optionality of the convertibles in their last month before they are called.

The convertibles were called by the company early Friday concurrently with an announcement of a new $300 million share buyback program and earnings that beat estimates.

Fourth-quarter net income rose to $259 million, or 50 cents per share, from $195 million, or 36 cents per share, in the year-earlier quarter.

Revenue rose to $2.07 billion from $2.01 billion in the year earlier quarter. Analysts had expected the company to earn 39 cents a share on revenue of $2.07 billion.

There is $400 million outstanding on the 4.25% convertibles, and the redemption date is set for March 26. Interpublic expects to fund the payout using available liquidity, which may include proceeds of borrowings in the capital markets.

Holders have the right to convert their notes at a rate of 82.4612 shares per bond until March 23. The notes are convertible into 33 million shares. The redemption price is equal to $1,000 per $1,000 principal plus interest.

Interpublic also announced a new stock buyback program for up to $300 million of common stock. The authorization under the new program is in addition to any amounts remaining for repurchase under the program announced in 2011.

Salesforce.com slips

Salesforce.com's 0.75% convertibles due 2015 traded at 175.8 on Friday, which was down 1.775 points, according to Trace data, with shares of the company jumping 9% on strong earnings.

The company, which delivers software and services over the internet, reported a loss for its most recent quarter, but excluding one-time items it earned 43 cents per share, which was 3 cents above the consensus estimate.

Salesforce revenue rose 38% to $632 million for the quarter from the year-earlier period. That was better than the $624 million that analysts expected.

Savient trades lower

Savient's 4.75% convertible notes due 2018 traded at 43.75 to 44 and was later seen at 45 bid, 46 offered.

Shares of the East Brunswick, N.J.-based biopharmaceutical company slipped by 2 cents, or nearly a percentage point, to $2.12 on Friday.

"With the bonds lower, it's obviously an interesting situation," a New York-based sellsider said. "There are not that many issues like this that are trading at this kind of distressed level."

Savient is set to report its quarterly earnings on Monday.

Savient shares have dropped since the convertibles initially priced a little more than a year ago on Jan. 31, 2011 amid lower expectations of sales of its Krystexxa gout drug.

Mentioned in this article:

Endo Pharmaceuticals Holdings Inc. Nasdaq: ENDP

Interpublic Group of Cos. Inc. NYSE: IPG

James River Coal Co. Nasdaq: JRCC

Salesforce.com Inc. NYSE: CRM

Savient Pharmaceuticals Inc. Nasdaq: SVNT

© 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.