NXP Semiconductors extends gains; energy sector heavy; ANI Pharmaceuticals on tap

By Rebecca Melvin

New York, Dec. 4 – NXP Semiconductors NV’s 1% convertibles traded higher Thursday as the Dutch semiconductor components company’s $1 billion issue, which priced last week, continued to attract market players.

Energy convertibles remained in focus, but they were not trading actively as buyers were scarce, and opinion remained divided on the outlook for the sector.

Some believe the damage to the energy sector was done last week and early this week, and now the sector is stabilizing and represents a buying opportunity.

Others say the pain isn’t over yet and that it isn’t reserved for the weakest names only. They see the fallout from lower crude extending beyond the energy sector and filtering into some of the mining and metals names and the industrial sector, a trader said.

Crude oil prices were down on Thursday to the $66 per barrel mark. Bank of America said earlier this week that the price of crude could slump to $50 within a month.

Financials and health care names were among the quieter areas of the convertibles market on Thursday, a New York-based trader said. But Salix Pharmaceuticals Ltd.’s convertibles traded up on both an outright and dollar-neutral, or hedged, basis amid renewed speculation that a takeout of the Raleigh, N.C.-based specialty drug company may get done at a strong premium to shares, a trader said.

In the primary market, ANI Pharmaceuticals Inc. threw its hat into the arena, launching a $100 million offering of five-year convertible senior notes that was talked to yield 3% to 3.5% with an initial conversion premium of 25% to 30%.

Shares of ANI, a Baudette, Minn.-based specialty pharmaceutical company, fell 11% to $53.45 after the new deal was launched.

ANI was expected to price after the market close with PROS Holdings Inc.’s $125 million offering of five-year convertible senior notes.

The PROS deal was talked to yield 1.75% to 2.25% with a 27.5% to 32.5% premium.

Valuations on the two, rather small deals were not immediately available.

Also in the primary market, Fiat Chrysler Automobiles NV said it has launched its offerings of $2.5 billion of mandatory convertibles and 87 million shares of common stock. The deal will price Dec. 10, according to a syndicate source. Price talk was not immediately available.

Overall, the convertibles market felt heavier, a New York-based trader said. Market players were quoting bonds lower in the energy space, and beyond energy, many in-the-money names that are less bond-like and more equity sensitive were for sale.

“It seems like people are trying to raise cash before year-end,” which is contrary to what typically happens at this point, the trader said.

NXP trades higher

The NXP convertibles were quoted at 102.5 versus an underlying share price of $76.85. That was up from Tuesday when they were seen at 101.125 with the underlying shares at $75.36 at the close.

At the close NXP shares were down $1.00, or 1%, at $75.85.

One trader said NXP was about the only thing currently trading in the convertibles market.

Its popularity has to do with the fact that it’s a large deal for a technology company that has a large $17.5 billion market capitalization, and that the issue is going to be added to benchmark indices, a trader said.

Salix adds outright, on hedge

Salix’s 1.5% convertibles due 2019 traded as high as 174.75 on Thursday, against shares that hit a high of $109.74, a New York-based trader said.

That compared to 168.5 versus a share price of $104.00 coming into the day, the trader said.

There was a lot of outright interest in Salix on Thursday, and the gain was 6.25 points on an outright basis, but also an additional 0.5 point on a hedged basis, the trader said.

He attributed the rise to speculation that the company is going to be taken over. “There’s 2.5 points to 3 points on a takeout, depending on a delta of 86%,” he said.

Salix shares had been up about $5.00 but pared early gains to close the day up only $1.84, or 1.8%, to $105.88.

ANI stock borrow limited

Some market players were overlooking ANI’s $100 million of five-year convertible senior notes that launched ahead of the market open and were expected to price after the close.

“There are borrow issues on ANIP; and it’s the type of name that I try to avoid,” a New York-based trader said.

Realized vol. is 60% to 80%.

The specialty pharmaceutical company was expected to price the new notes with a 3% to 3.5% yield and a 25% to 30% premium.

The registered, off-the-shelf deal has a $15 million greenshoe and was being sold via bookrunners Guggenheim Securities, LLC and Nomura Securities International Inc.

The notes are non-callable and have standard takeover and dividend protection. They will settle in cash, stock, or a combination at the issuer’s option.

A portion of the proceeds will be used to pay the net cost of the call spread. Remaining proceeds will be used for research, development and commercialization of drug products, to acquire complementary businesses, products, and technologies from time to time and for other working capital and general corporate purposes.

Mentioned in this article:

ANI Pharmaceuticals Inc. Nasdaq: ANIP

NXP Semiconductors NV Nasdaq: NXPI

PROS Holdings Inc. Nasdaq: PROS

Salix Plarmaceuticals Inc. Nasdaq: SLXP

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