New Sunrise Senior Living gains on debut; Amylin higher outright after positive drug news

By Rebecca Melvin

New York, April 15 - Sunrise Senior Living Inc.'s newly priced 5% convertible junior subordinated notes rose on their debut in secondary market trading Friday to 103.5 bid, 104.5 offered at about mid session with the shares up, representing a 1.5-point to 2-point gain on a swap basis, a syndicate source said.

Amylin Pharmaceuticals Inc.'s convertibles gained outright after the San Diego-based drug discovery company said that a European committee endorsed Bydureon, marking a significant step forward in its application for use in the European Union for the diabetes treatment it makes together with Eli Lilly and Co.

Affiliated Managers Group Inc.'s convertibles were also in trade as shares of the Prides Crossing, Mass.-based asset manager drifted higher on the day.

The Affiliated Managers' action wasn't seen as overly notable, however. The investment-grade convertibles trade on an outright basis. "It's something that the outright guys will put on and trade around," a New York-based sellside trader said.

Overall the market was quiet with few notable trading trends and no sector moves to speak of.

"All day, it's been just dead," a New York-based sellside trader said, noting that the market has little or no follow through from day to day.

For example, Teleflex Inc., which was a top trader Thursday and came in 0.625 point or more on a delta-neutral basis, was not seen in trade again on Friday, except for small, odd-lot trades.

That was one of those moves where a good bit was flying around and it was impossible to tell why, the trader said. "Usually you can figure out why, but with this no one was able or willing to say why it was so active."

Meanwhile, in overseas primary market action, Taiwan's TPK Holding Co. Ltd., which makes capacitative touch technology products used in smartphones and tablets, priced $400 million of 0% three-year convertible bonds, representing the largest international convertible bond deal in Taiwan year to date.

Out of Brussels, Cofinimmo SA sold €173.3 million of 3.125% five-year convertible bonds with a 15% initial conversion premium that came at the midpoint of talk for the Regulation S offering.

Sunrise makes bright start

Sunrise Senior's newly priced 5% convertibles due 2041 traded up to 103.5 bid, 104.5 offered versus a share price of $9.12 on their debut Friday.

Shares of the McLean, Va.-based provider of senior living services added 12 cents, or 1.3%, to $9.12 before slipped back to a 0.9% gain for a $9.08 close.

Sunrise modeled out cheap despite its 30-year maturity, which was viewed as a detraction of the bond particularly because it's non-callable.

The convertible, viewed rather as a preferred, looked priced to go to the hedge guys.

"Expect the stock to get smoked," a sellsider said Thursday. He used a credit spread of 1,000 basis points over Libor and 25% vol., and got fair value at 104.5, which was right about where they were on Friday.

He predicted that hedge guys would buy it "because at a 95% to 98% delta, how bad can you get hurt?"

In fact the stock held up well and placement was praised as very healthy.

"I don't like this structure, but I give the underwriter credit for pricing the deal properly," a New York-based sellsider said. "It looks like two swap prints have gone up, looks like $2 million bonds on an 85% delta was the larger one."

Stifel Nicolaus & Co. Inc. was the bookrunner of the deal, with KeyBanc Capital Markets LLC as a co-manager.

Sunrise priced $75 million of 30-year junior subordinated convertible notes under Rule 144A. In addition to the 5% yield, it has a 20.5% initial conversion premium. Pricing came at the midpoint of talk.

The 30-year junior notes are non-callable with no puts.

The notes are freely convertible until April 6, 2016, and then conversion rights may be terminated if shares are 130% of the conversion price for at least 20 out of 30 consecutive trading days.

Proceeds will be used for general corporate purposes, including paying down joint-venture debt and funding the acquisition of joint ventures.

Amylin gains on endorsement

Amylin's longer-dated paper, the 3% convertibles due 2014, traded early Friday at 89 and later at 90 and change. They weren't seen in trade on Thursday, but on Tuesday they traded at 86.5 and 86.75.

The bonds trade outright.

"These are up 3 points to 6.56% yield, or 511 bps. It's tightened up a lot," a New York-based sellside trader said.

Shares of the San Diego-based drug discovery company surged $1.83, or 16.25%, to $13.09 on Friday.

"This is a credit that has gone through its ups and downs on drug approval, good news/bad news on these drugs, particularly the diabetes drug; but this can be viewed as significantly positive data," the trader said.

Amylin, Eli Lily and Alkermes Inc. said in a joint news release before the market open that the Committee for Medicinal Products for Human Use of the European Medicines Agency issued a positive opinion recommending approval for its Bydureon once-weekly, injectable version of the type 2 diabetes treatment Byetta.

The European Commission, which approves drugs for the European Union, usually takes the recommendations given by this panel within two to three months.

Teleflex silent after flurry

Teleflex's early trades Thursday went up at 111.75 versus a share price $58.13. The bonds, 3.875% convertibles due 2017, later printed at 114.036 versus a share price of $60.14, which was in another 0.125 point.

"Interestingly the bonds were pretty active until 11:30 a.m. and then again after 2 p.m.," the trader said. "The stock moved up nicely during that lull in the bond trading."

On Wednesday, the Teleflex bonds were 112.25 bid, 112.5 offered versus a share price of $58.11.

The bonds weren't heard on Friday.

Mentioned in this article:

Affiliated Managers Group Inc. NYSE: AMG

Amylin Pharmaceuticals Inc. Nasdaq: AMLN

Cofinimmo SA Brussels: COFD

Sunrise Senior Living Inc. NYSE: SRZ

Teleflex Inc. NYSE: TFX

TPK Holding Co. Ltd. Taiwan: 3673

WebMD Health Corp. Nasdaq: WBMD

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