Medicines convertibles gain; Intelsat tumbles; Chefs’ Warehouse planned notes eyed

By Rebecca Melvin

New York, Nov. 19 – All three of the Medicines Co.’s convertible notes jumped in active trade on Tuesday amid speculation that several buyers are interested in acquiring the company, including swiss pharmaceutical giant Novartis AG. Medicines shares also surged on Tuesday.

Medicines was the focus of the day, accounting for three of the top five issues traded in the convertibles market, a New York-based portfolio manager said. There is “speculation that multiple suitors are in the weeds looking at it.”

The Medicines 2.5% notes due 2022 spiraled to more than double par from about 160, and was seen up 1 to 3 points on a swap basis, depending on delta.

The Medicines 2.75% notes due 2023 climbed about 20 points outright and was last 16 points higher at about 149 and was about unchanged on swap.

The newest Medicines issue, a 3.5% note due 2024, was seen changing hands at 285.5, the highest dollar price but the least active of the three notes. Shares surged by 27%, but pulled back some to close up $11.56, or 20%, to $70.21.

A Bloomberg report suggested the company, which makes a promising cholesterol drug, is being studied as a takeover target by Novartis and that there have been expressions of interest from other possible buyers.

Earlier this week the company published encouraging results at an American Heart Association conference for Inclisiran, a twice-yearly treatment that could become a standard of care for patients suffering from high levels of LDL.

Elsewhere in trade, Intelsat SA’s 4.5% convertibles continued to plunge after a decision by the Federal Communications Commission to repurpose C-band spectrum for 5G services through public auction.

Intelsat’s convertibles traded last at 54.5 to 55, which was down from the low 70s on Monday and down from over par on Friday. Shares of the satellite telecommunications company were also tumbling. They fell 29% to $5.69 early Tuesday. On Friday they closed at $13.40.

Satellite operators were capsized by the FCC decision for a public auction, which the satellite operators have opposed.

Among tech names, Western Digital Corp.’s 1.5% convertibles due 2024 was another active name in the convertibles space on Tuesday and was seen changing hands at 94.125 as shares of the computer hard disk drive maker fell $1.99, or 4%, to $47.52.

Palo Alto Networks Inc. was another active tech name. The Palo Alto 0.75% notes due 2023 changed hands down 0.172 point to 114.1 versus the underlying shares, which closed off just 41 cents to $248.18.

Meanwhile in the primary market, Chefs’ Warehouse Inc.’s $130 million offering of five-year convertibles, which was announced late Monday, was looking to be worth just 100.10 at the midpoint of price talk using a credit spread of 425 basis points over Libor and 32% vol., according to a New York-based trader on Tuesday.

The deal for the specialty food products distributor, which was expected to price after the market close on Tuesday, was being talked at a 1.375% to 1.875% yield and a 32.5% to 37.5% initial conversion premium.

The common shares of the company dropped in active trading early Tuesday, down $3.24, or 9%, to $32.36 in intraday trading.

In the broader markets, U.S. Treasuries regained some ground with yields slipping back after a pop on Monday, and stock indices slipped.

“The broader market was a bit weaker and it seemed like dealers were getting longer paper,” a market source said.

Medicines surges

The Medicines 3.5% notes due 2024 were seen changing hands at 285.5.

This issue was traded by less than half of the volume of each of the other two tranches, but they were definitely active, a manager said, who added that this issue seemed the most interesting of the three despite its higher price tag.

Shares surged out of the chute by 27% and closed up $11.56, or 20%, to $70.21. The move extended a 12.8% jump in shares on Monday after news that Inclisiran has achieved promising results.

The Medicines 2.5% convertibles traded up to 210 from about 160, or 1 to 3 points on swap while the Medicines. 2.75% convertibles traded up to as high as 156 before slipping back to 149.4 from around 130. That was seen about unchanged on a dollar-neutral basis.

Mentioned in this article:

Chefs’ Warehouse Inc. Nasdaq: CHEF

Intelsat SA NYSE: I

Medicines Co. Nasdaq: MDCO

Palo Alto Networks Inc. Nasdaq: PANW

Western Digital Corp. NYSE: WDC

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