BB Biotech launches CHF 150 convertibles at 3.25% to 3.50%, up 15% to 20%

By Ronda Fears

Nashville, Dec. 14 - Swiss fund BB Biotech AG launched CHF 150 million of three-year convertible bonds, up to half of which will be mandatorily convertible at maturity, with price talk of a 3.25% to 3.50% coupon and an initial conversion premium of 15% to 20%.

Joint managers of the deal, which is slated to price in Europe on Friday, are Bank am Bellevue AG and HVB Corporates and Markets.

There is a greenshoe of CHF 50 million.

BB Biotech, which focuses on U.S. and European biotech stocks, said it would use the funds for investment purposes.

Holders of BB Biotech shares are being granted advance subscription rights through Thursday.

The company said it was making the offering in view of "good growth prospects in the biotechnology sector and the current reasonable valuation levels."

In addition, the deal continues a strategy of diversifying the shareholder base.

BB Biotech shares closed unchanged Wednesday on the Swiss stock exchange at CHF 49.30.

The BB Biotech issue, however, was considered expensive by sellside analysts. Additionally, onlookers expect little liquidity in the convertible post-issuance.

Barclays Capital Markets convertible analysts said in a report Wednesday that, assuming a credit spread of 200 basis points over Libor, an 18% stock volatility and 75 bps borrow cost, they see the bond worth about 96, or 4% rich, at the worst end of the indicated range and 99, or 1% rich, on best terms.

Narrowing the credit spread to 100 bps, the analysts said, would only improve their estimated fair value of the issue to 97, or 3% rich, to 100, or fair value.

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