Salix Pharmaceuticals, Medivation to price; Suntech Power slips; Central European extends gains

By Rebecca Melvin

New York, March 12 - Convertible bonds put in an exceptionally quiet session on Monday, but after the markets closed, traders and investors were cheered by two new deals that launched for pricing on Tuesday.

Salix Pharmaceuticals Ltd. launched a $500 million Rule 144A offering of seven-year convertible senior notes, and Medivation Inc. launched a $175 million registered deal of five-year convertible senior notes.

Salix was seen pricing ahead of the market open on Tuesday and Medivation was seen pricing after the market close.

As for Monday's session, "it was totally dead," a Connecticut-based trader said, citing that it was a typically quiet Monday combined with unusually warm, pleasant weather for the Northeast in March. That may have kept some players away from their desks.

Suntech Power Holdings Co. Ltd. traded some and was down a little, but not by much compared to a 4% slide in the underlying shares, a trader said.

AMR Corp. was trading in line, as was the convertibles of Eastman Kodak Co. Both are extremely distressed convertibles with issuers currently in bankruptcy court.

Central European Distribution Corp. (CEDC) also was mentioned in trade, but more for its move on Friday than for its move on Monday. On Friday, the CEDC convertibles moved up from about 80 to the mid-80s. On Monday, the notes extended that move, ending the session at about 86 bid, 88 offered, according to sources.

Behind the CEDC action was a revised proposal from its largest shareholder, Russian billionaire Roustam Tariko, which looks like it is large enough cover the convertibles debt maturity in March 2013.

"They've been moving," a New York-based trader said of the CEDC convertibles.

Salix to price $500 million

Salix, the Raleigh, N.C.-based maker and marketer of prescription drugs to treat gastrointestinal diseases, said it was offering $500 million of seven-year convertibles that will be used to repurchase stock and repay bonds, among other things.

Price talk for the new convertible was for a coupon of 1.5% to 1.75% and an initial conversion premium of 35%.

The Rule 144A offering has a greenshoe of $75 million and was being sold via Bank of America Merrill Lynch.

The notes will be non-callable and may not be put. There is a call spread attached to the deal.

Salix has existing convertibles.

Medivation to price

San Francisco-based biopharmaceutical company Medivation plans to price $175 million five-year convertible senior notes on Tuesday after the market close.

Price talk is for a coupon of 2.625% to 3.125% and an initial conversion premium of 37.5% to 42.5%.

The registered offering has a greenshoe of $26.25 million and was being sold by Citigroup Global Markets Inc.

The notes will be non-callable for three years and then provisionally callable subject to shares trading at 130% of conversion.

The proceeds will be used for working capital, including further development and potential commercialization of its product candidates, and for general corporate purposes. Proceeds also may be used to invest in complementary products, technologies or businesses.

Suntech Power slips

Suntech Power's 3% convertibles due March 2013 traded a little under 72 on Monday, which was a little lower than where it had been, "but nothing earth shattering," a Connecticut based trader said.

The bonds, which mature in one year, are expected to move around, the trader said.

"They are in a funny spot," he said. "With a year to go, they will have to be either a lot higher or a lot lower at some point soon."

Late last week Suntech, the world's largest producer of photovoltaic solar panels, reported a wider than expected quarterly loss due to lower demand and less beneficial pricing for the panels.

But Suntech forecast full-year shipments of 2.1 GW to 2.5 GW, which are slightly higher than the 2.09 GW if shipped last year.

Suntech said it expected growth in the United States, China, India and Japan to offset a decline in the European market.

CEDC jumps again

Central European's 3% convertibles due 2013 traded up to 86 bid, 88 offered on Monday. The paper had jumped from about 80 to mid-80s on Friday.

But the volatile issue has been up in the 90s and down in the 40s depending on the prospects for recovery upon maturity of the convertibles next year.

Right now, recovery prospects look better, but it's not a done deal.

Central European's largest shareholder, Russian billionaire Roustam Tariko, made a revised proposal that would see him raise his investment to $100 million, of which he would buy $30 million of new shares for $5.25 per share, and spend $70 million to buy new debt at par, convertible into CEDC shares at a rate of $5.25 per share.

In February, Tariko offered to exchange debt owed to him by the company into equity at $7 per share.

The revised proposal filed with the U.S. SEC on Friday also includes the conversion of up to $102.5 million of CEDC's 2013 notes held by Tariko's Russian Standard at par into a new debt security maturing in 2016 and a support agreement to repay the rest of CEDC's debt at maturity next year.

In exchange, Tariko would gain veto rights with respect to the size of CEDC's board and management positions in Russia among other conditions, and gain three seats on the board.

On Friday, one source said, there were a lot of dealers selling at around 81, which ultimately was a bad price to get given where the bonds now stand.

"If the deal goes through, the bonds will go to the mid- to high-90s," the source said.

Mentioned in this article:

AMR Corp. Pink Sheets: AAMRQ

Central European Distribution Corp. Nasdaq: CEDC

Eastman Kodak Co. Pink Sheets EKDK

Medivation Inc. NYSE: MDVN

Salix Pharmaceuticals Ltd. Nasdaq: SLXP

Suntech Power Holdings Co. Ltd. NYSE: STP

© 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.