Sequenom convertibles jump to par on news of LabCorp takeover; activity in FXCM picks up

By Stephanie N. Rotondo

Seattle, July 27 – Sequenom Inc.’s convertible bonds were flying higher on Wednesday as Laboratory Corporation of America Holdings announced it was acquiring its smaller rival.

A trader said the Sequenom convertibles – two issues of 5% notes due 2017 and 2018 – jumped to trade at or over par, which compared to levels around 60 on Tuesday.

The issues traded up to a 100.5 bid, 100.75 context, according to the trader.

“Guys were sweating this thing out about whether or not it would ever pay off,” the trader said of the bonds.

When it was trading in the 60s, bids were hard to come by, he noted.

“It’s a good deal for everybody involved,” he said, adding that the market was “satisfied with the deal risk.”

As for the equity underlying the debt, it jumped 176.25% to $2.35.

Under the terms of the deal, LabCorp will pay $2.40 per share, representing an equity value of $302 million. The price per share also equals a 182% premium over Tuesday’s closing share price.

Sequenom is a San Diego-based manufacturer of non-invasive prenatal tests. The company’s portfolio will complement LabCorp’s own line of women’s health and reproductive genetics testing products.

FXCM on the radar

Aside from Sequenom – “the most active name” in early midweek trading, according to a trader – there continued to be a surge in interest in FXCM Inc.’s 2.25% convertible notes due 2018.

“They haven’t traded in many moons,” a trader said. “Then they traded two days ago and again today.”

He saw round-lots trading with a 37 handle and small pieces trading as high as 39.

The stock was initially off 12 cents, or 1.23%, at $9.54. But it eventually closed up 26 cents, or 2.69%, at $9.92.

The trader said there really was no reason for the market’s interest to pick up.

“Nothing has changed in that story,” he said. “[Convert holders] are still subordinated to the Leucadia loan. Until that gets taken care of, everybody is at the back door looking in.”

In January 2015, FXCM and Leucadia entered into a $300 million credit agreement, as FXCM dealt with $225 million in losses tied to the Swiss government’s decision to scrap its currency cap versus the euro. The loan initially carried a 10% interest rate, though that was to increase by 150 basis points each quarter until a maximum rate of 17% was hit.

Earlier this year, the parties amended the terms of that deal, extending the maturity to January 2018 in order to give FXCM more time to sell off non-core assets.

Until the loan is fully repaid, any funds FXCM receives from asset sales goes to Leucadia.

Mentioned in this article:

Sequenom Inc. Nasdaq: SQNM

FXCM Inc. NYSE: FXCM

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