Holiday weekend results in subdued trading; Theravance, Solazyme new issues lackluster

By Stephanie N. Rotondo

Phoenix, Jan. 18 - The upcoming three-day weekend was weighing on the convertible bond market Friday, at least in terms of liquidity.

"That's the way it goes," a trader said. "When there's a holiday, people take off early."

The market was focusing on the new issue calendar, which brought several new issues over the course of the week, including two that were priced late Thursday.

Theravance Inc. priced a $250 million issue of 2.125% 10-year convertibles, which was at the mid-point of talk. Come Friday trading, the new deal "didn't hold too well," according to a trader.

Solazyme Inc. also brought a deal, a $115 million issue of 6% convertible notes due 2018. That deal wasn't getting much play, sources reported, and one source opined that it was because investors were "tapped out."

"It's been a rather healthy calendar so far in 2013," a trader said. "I hope very strongly that that continues."

Theravance slips post-pricing

Theravance's newly priced 2.125% convertible notes due 2023 were not holding in all that well post-pricing.

A trader said the new issue traded as high as 101¼ bid, 101 3/8 offered but then fell to par. He noted that there were "a lot of prints" around 993/4.

The common stock (Nasdaq: THRX) closed down 27 cents, or 1.31%, to $20.69.

"It didn't hold too well," he said. He opined that investors might be "tapped out" considering that three new deals from the week were in the same biotechnology arena.

Another trader said he was hearing that the deal was "maybe not doing so well based on the term of the paper.

"Ten-year paper on a biotech that's still burning cash, that's not an easy one to swallow," he said.

Still, he noted that most of the new issues seen recently have been "typical," in that they are "small biotechs not making any money with a story down the road."

Proceeds are intended to be used for potential milestone payments to GlaxoSmithKline plc if there is any approval or launch of products under the parties' collaboration, for the potential repayment of debt and for other general corporate purposes.

The company also intends to use a portion of the proceeds to pay the cost of entering into capped call transactions with the underwriter and/or affiliates.

Theravance is a San Francisco-based biopharmaceutical company.

Solazyme fizzles

A trader said that Solazyme's new 6% convertibles due 2018 were not all that active, despite pricing late Thursday.

He noted that there was a par bid for paper late in the previous session but that he had not seen any markets in Friday's session.

"It's the way things get put away these days," he said. "Sometimes you see it, sometimes you don't."

The company's equity (Nasdaq: SZYM), however, was trading up 36 cents, or 5.31%, to $7.24.

The convertibles are non-callable with no investor puts. There is full dividend and takeover protection.

Proceeds will be used to fund project-related costs and capital expenditures and for general corporate purpose.

San Francisco-based Solazyme uses plant-based sugars to produce oils for use in the chemicals and fuels industries, as well as for the nutrition, skin and personal care markets.

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