Savient collapses after bankruptcy filing; MolyCorp drops; Resource, SolarCity on tap

By Rebecca Melvin

New York, Oct. 15 - Trading of convertible debt picked up Tuesday amid a combination of issue-specific headlines, earnings news beginning to trickle in and the fact that more market players were back in action as bond markets reopened following the long holiday weekend in observance of Columbus Day. Pricing was said to be little changed.

"It was definitely more active, but not a ton of volume honestly. Pricing was in line; buyers and sellers were coming in about the same," a New York-based trader said.

Savient Pharmaceuticals Inc.'s 4.75% convertibles due 2018 were seen 1 bid, 15 offered on Tuesday and were said to have traded at 2 after the East Brunswick, N.J.-based specialty biopharmaceutical company filed for Chapter 11 bankruptcy late Monday.

The bankrupt company also entered into an acquisition agreement with Sloan Holdings CV, a subsidiary of US WorldMeds LLC, as a stalking horse bidder. Sloan will acquire substantially all of the assets of Savient, including all Krystexxa assets, for about $55 million, according to a company news release.

MolyCorp Inc. dropped after the Greenwood Village, Colo.-based rare earths minerals miner said in a filing that it expects to run at negative cash flows and will have to raise additional capital. The company also announced that it will sell up to $200 million of common stock subject to market conditions.

But moving the opposite direction, American Realty Capital Properties Inc.'s 3% convertibles due 2018 jumped about 3 points in active trade to around 101, according to Trace data, after the mortgage-related real estate investment trust received an investment-grade credit rating with stable outlook from Moody's Investors Service.

Shares of the New York-based real estate investment company added 15 cents, or 1.2%, to $12.77.

Market players were sizing up another REIT deal that priced late Tuesday. Resource Capital Corp.'s $100 million offering of five-year convertibles was called cheap, according to one trader's valuation, but the deal wasn't seen in the gray market ahead of pricing, sources said.

Also in the primary market, SolarCity Corp. launched an upsized $200 million of five-year convertible senior notes that were seen pricing late Tuesday and were talked to yield 2.75% to 3.25% with a 27.5% to 32.5% initial conversion premium, according to a syndicate source.

Overall, it was "pretty busy," a trading desk representative said.

"It seemed like a lot today, but pricewise, it was in line," a trader said.

Allegheny Technologies Inc. was in trade at 103 to 103.375%, the trader said. The Pittsburgh-based specialty metals maker may have been pulled into trade by the earnings beat posted by Rio Tinto.

"Steel stocks were higher today. Rio Tinto had earnings and all these other steel stocks are up including ATI and U.S. Steel," the trader said. For its part, Allegheny said Monday that sales for the third quarter will be lower than expected amid a restructuring of its engineered products segment.

Elsewhere, Liberty Media Corp.'s 1.375% convertibles were seen in trade at an improved 103.5 bid, 104 offered with the underlying shares lower. The bonds, which debuted Friday, had been 102 to 103 previously.

Savient slumps to 2

Savient's 4.75% convertible senior notes due 2018 were heard to have changed hands on Tuesday at 2, according to a New York-based trader. The paper was previously in the 20s.

A second trader said there was a market in the paper Tuesday afternoon at 1 bid, 15 offered.

Savient shares skidded 50 cents, or 88%, to $0.0716 in heavy volume.

The New Jersey-based biopharma filed Chapter 11 bankruptcy late Monday in the U.S. Bankruptcy Court for the District of Delaware and has entered into an agreement under which US WorldMeds, LLC subsidiary Sloan Holdings CV would be the stalking horse bidder in the proposed sale of Savient's assets, according to a company news release.

Under the stalking horse bid, Sloan agreed to acquire substantially all of the assets of Savient, including all Krystexxa assets, for about $55 million.

The sale agreement calls for a court-supervised auction process, and the transaction is subject to bankruptcy court approval.

If Sloan is not the high bidder for the assets, Savient will pay it a $1.65 million break-up fee and reimburse up to $750,000 of its sale-related expenses.

Competing bids are due by 5 p.m. ET on Nov. 20 and must have a value greater than the sum of the proposed purchase price, the amount of the break-up fee and expense reimbursement, the amount of assumed liabilities and a $200,000 initial overbid.

The auction will be held on Nov. 22.

MolyCorp drops

MolyCorp's 3.25% convertibles due 2016 were bid at 66 in early action, according to a New York-based trader. The bonds traded around 68 to 69 during the session, according to a second trader, and then moved higher to 71, but that was still off from a small-lot trade with a 75 handle on Oct. 10.

The MolyCorp 3.25% issue is pretty illiquid generally, sources said.

MolyCorp's 5.5% convertibles due 2018 traded in the 93 bid, 95 offered context, which was down from about 107 previously.

Meanwhile, MolyCorp's 6% convertibles due 2017 were active in the range of 74 to 78.

MoyCorp shares fell $1.52, or 21%, to $5.58 in ultra-heavy volume.

"MCP is a disaster," a convertibles analyst said of the name.

The convertibles and shares fell after the rare earths company said that it expects to generate negative cash flow in the third quarter and its cash cushion has dwindled. The company also announced that it is selling $200 million of common shares.

Proceeds of the stock offering will be used to fund current capital needs for capital expenditures and other cash requirements such as improvements at its Mountain Pass, Calif.-based operations.

The company's news sent the securities in the opposite direction from earlier this month when they went up on news that its last major construction projects at the Mountain Pass, Calif., plant had been completed and the units were expected to be commissioned and begin production in the fourth quarter.

Last week, MolyCorp named former chief operating officer Geoff Bedford as its chief executive officer, replacing Constantine Karayannopoulos, who took the helm on an interim basis.

Resource Capital looks cheap

The $100 million Resource Capital deal, which launched late Monday and priced late Tuesday, were seen at fair value of about 103 using a credit spread of 575 basis points over Libor and a 22% vol. at the midpoint of talked terms, according to a Connecticut-based trader.

The Resource Capital deal, which was smallish, was not heard in the gray market ahead of final terms being fixed.

The deal was talked at a 5.75% to 6.25% coupon and a 10% to 15% initial conversion premium.

The registered offering, which has a $15 million greenshoe, was previously expected to have a base deal size of $125 million.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were joint bookrunning managers of the deal. Keefe, Bruyette & Woods was senior co-manager, and JMP Securities LLC and MLV & Co. LLC were co-managers.

The New York-based specialty finance company Resource Capital focuses primarily on commercial real estate and commercial finance.

SolarCity on tap

SolarCity, a San Mateo, Calif., provider of clean distributed energy, launched an upsized $200 million of five-year convertible senior notes that were seen pricing late Tuesday and were talked to yield 2.75% to 3.25% with a 27.5% to 32.5% initial conversion premium, according to a syndicate source.

The registered offering, which has a $30 million greenshoe, was previously expected to have a base deal size of $125 million.

The bonds are non-callable and have takeover protection.

Goldman Sachs & Co., Credit Suisse Securities (USA) LLC and BofA Merrill Lynch are the joint lead managers, and JPMorgan is a co-manager.

Proceeds are intended for general corporate purposes, which includes working capital, capital expenditures, potential acquisitions and strategic transactions.

Mentioned in this article:

American Realty Capital Properties Inc. Nasdaq: ARCP

Allegheny Technologies Inc. NYSE: ATI

Liberty Media Corp. Nasdaq: LMCA

MolyCorp Inc. NYSE: MCP

Resource Capital Corp. NYSE: RSO

Savient Pharmaceuticals Inc. Nasdaq: SVNT

SolarCity Corp. Nasdaq: SCTY

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