Amgen jumps in line on positive drug news; Transocean active; Home Inns prices; Swift on tap

By Rebecca Melvin

New York, Dec. 14 - Amgen Inc.'s longer-dated convertibles due 2013 traded actively in line with their underlying shares on Tuesday after the biotechnology company reported late-stage clinical trial data showing that its denosumab drug stopped cancer from spreading to the bones of patients for about four months longer than a placebo.

Transocean Ltd. saw its 1.5% series B and series C convertibles due 2037 trading at steady to higher pricing ahead of an investor put Wednesday on the Transocean 1.625% series A convertibles due 2037.

Convertibles players were also sizing up Home Inns & Hotels Management Inc. ahead of final pricing of the $160 million offering of five-year convertible senior notes that came after the close.

The planned Home Inns & Hotels deal was quiet in the gray market Tuesday but looking cheap, according to sources, given that the Shanghai-based hotel chain operating in China was seen as a leader of its sector with pretty strong financials.

Also expected to price after the market close Tuesday, Swift Holdings Corp. was also quiet in the gray market.

Because the Phoenix-based transportation services company and truckload carrier is doing a concurrent initial public offering, it's impossible to borrow stock to short against the second planned deal, "so I'm not surprised it's quiet," a New York-based sellsider said.

Best Buy Co. Inc. saw its 2.25% convertibles due 2021 traded at 106 versus a share price of $35.75 after the Richfield, Minn.-based electronics retailer reported disappointing quarterly earnings and U.S. same-stores sales that were down 5%.

Amgen jumps

Amgen's 0.375% convertibles due 2013 traded as high as 101.18 in active trading and as low as 100.25. Most trades of the paper were in the 100.375 to 100.625 range.

Investors were taking positions on the B paper, which has enough time left to react to changes in the stock.

Amgen's 0.125% convertibles due February 2011, on the other hand, were quiet in trade and steady at around par.

Shares of the Thousand Oaks, Calif.-based biotechnology company jumped $2.65, or 4.9%, to $56.76 in very active trading.

"Tons of AMGN B were trading," a New York-based sellside trader said, adding that the paper was "in line, nuking on a 15% delta."

The trader was referring to a low level of hedging associated with the paper. "A lot of the bonds were trading outright, however," the sellsider said.

Given that the paper was trading up in line with the underlying shares, the Amgen trades were a "non-event," a second New York-based sellsider said.

After the market close on Monday, Amgen announced that a phase three trial of its Xgeva, or denosumab, drug showed that the treatment improved bone metastasis-free survival by 4.2 months compared to a placebo in patients with prostate cancer.

The drug also improved the time it took cancer to spread to bone for the first time. Overall, survival was similar for Xgeva compared to the placebo.

Transocean active, steady

Transocean's B series 1.5% convertibles due 2037 traded at 98.625, which was within the 98.25 bid, 98.75 offered range in which the bond has been trading.

For the last several months, it has been right about there, a New York-based sellside analyst said, except for the occasional bubbles, and a low price was 98.125.

The Transocean C series 1.5% convertibles due 2037, which are the longest-dated of the three sister issues and have a put in 2012, traded at 97.

"Both were active with the As going away tomorrow," a New York-based sellside desk analyst said.

The Transocean 1.625% series A convertible senior notes due December 2037 were quiet however. Investors who were going to put them would have already given notification of the fact.

The paper is traded outright.

Transocean is a Vernier, Switzerland-based offshore drilling contractor and provider of drilling management services.

Home Inns prices $160 million

Home Inns priced $160 million of five-year convertible senior notes after the market close on Tuesday.

The deal's 2% coupon came at the rich end of talk, but the initial conversion premium of 20% was at the cheap end.

It was not heard in the gray market, and Home Inns' existing 0% convertibles "are never heard in trade."

A Connecticut-based sellside analyst put the deal 6.1% cheap at the midpoint of talk using a credit spread of 575 basis points over Treasuries and a 37% vol.

It was "tough to find comps being a Chinese lodging company," the analyst said, referring to comparable companies on which to help base the credit spread.

A second source was much tighter on the credit spread; but he said he likes the fact that the company is EBITDA positive and has net cash.

This company is hoarding cash so that it is well positioned for acquisitions when they become available, the New York-based sellside trader said.

The notes will be non-callable for their five-year life with no puts. There is dividend and takeover protection.

Proceeds are expected to be used for new business development, investments in complementary businesses and assets, strategic acquisitions and general corporate purposes.

The notes and the American Depositary Shares into which the notes are convertible have not been registered. The company will file a shelf registration for resale of the notes and the company's ordinary shares represented by the ADSs.

Home Inns is a Shanghai-based hotel chain operating in China.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Best Buy Co. Inc. NYSE: BBY

Home Inns & Hotels Management Inc. Nasdaq: HMIN

Transocean Ltd. NYSE: RIG

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