Exterran, Western upsize deals, weak stocks mar debuts; Steel Dynamics, Biovail stay afloat

By Kenneth Lim

Boston, June 5 - Weak common stocks muted the debuts of Exterran Holdings, Inc. and Western Refining, Inc. on an otherwise quiet trading session.

Exterran priced its upsized offering near the midpoint of talk on Thursday after the markets closed, and the new convertibles echoed lackluster interest in the gray market with a flat performance Friday.

Western Refining upsized its new deal and the notes traded up on Friday, but observers said the early surge reflected more the deal's cheap pricing and a poor common stock price.

The convertible market in general had a quiet session as a lack of direction in the equity markets gave convertible traders little to work with, market sources said.

"It's just slow today," a sellsider said. "People are just calling it a day early, I guess."

Trading was largely dominated by new issues.

Steel Dynamics Inc.'s new 5.125% convertibles due 2014 traded at 106.5 against a stock price of $14.50, unchanged from day-before levels. The company priced its upsized $250 million offering at the rich end of talk earlier in the week.

The common stock closed at $14.77, lower by 0.47% or $0.07.

Steel Dynamics is a Fort Wayne, Ind.-based steel producer and metals recycler.

Biovail Corp.'s new 5.375% convertible due 2014 was also flat on Friday, trading at 104.5 versus a common stock price of $11.85. The common stock gained 0.85% or $0.10 to close at $11.90.

Biovail, a Mississauga, Onta.-based pharmaceutical company, also upsized its deal to $300 million and priced it at the rich end of talk.

Exterran closes flat

Exterran's new 4.25% convertible senior note due 2014 closed at par on Friday, with the stock finishing the day at $18.30, a 1.98%, or $0.37, decline.

The convertible was priced at par with an initial conversion premium of 24% on Thursday after the markets closed. Price talk was at a coupon of 4% to 4.5% and an initial conversion premium of 22.5% to 27.5%.

The deal amount was increased to $325 million with an over-allotment option for an additional $48.75 million, up from the original $250 million with an additional $37.5 million greenshoe.

J.P. Morgan Securities Inc., Merrill Lynch & Co., Wachovia Securities LLC and Credit Suisse were the bookrunners.

Proceeds will be used to pay down revolving debt and an asset-backed securitization facility as well as to fund convertible note hedge transactions.

Exterran is a Houston-based oil and gas production company.

The new convertible's first-day performance reflected a lackluster reception in the gray market, where the paper was seen bid at par.

"It's not very interesting at the moment," a buysider said.

A sellside convertible trader said the deal looked reasonably priced.

"I think it looked OK," the trader said. "A number of these companies are selling converts to pay off debt"

Exterran, he added, "is doing the same thing. But the stock isn't doing so well today."

Western Refining gains

Western Refining's new 5.75% convertible due 2014 was up around 106 early Friday but dropped to 102 near the close.

The common stock closed at $8.53, down by 10.21% or $0.97.

The deal was upsized to $200 million from $100 million and arrived at the midpoint of talk with an initial conversion premium of 20% over a concurrent stock offering price of $9 per share.

The notes were marketed at a coupon of 5.5% to 6% and an initial conversion premium of 17.5% to 22.5%.

Merrill Lynch & Co. and Goldman, Sachs & Co. were the bookrunners.

The over-allotment option was doubled to an additional $30 million.

Proceeds will be used to repay a term loan.

Western Refining is an El Paso, Texas-based independent refining and marketing company. The company concurrently priced an upsized $20 million common stock offering at $9 per share, a 5% discount to the Thursday closing stock price.

A buysider thought that the Western Refining notes found demand mainly because pricing was extremely cheap and some of the investors may have been looking for the initial pop.

"The stock just collapsed," the buysider said. "It was priced very cheap and it's a [bad] company that was down 30% in the last two weeks. They priced it in the hole and the convertible was priced cheap."

But the initial gain may evaporate with time if the company's business prospects do not support the gains, the buysider said.

"We don't find them fundamentally good at the moment," the buysider said. "On the days when the markets go up they will do well, but when fundamentals matter, though, they're going to go down."

Mentioned in this article

Biovail Corp. NYSE: BVF

Exterran Holdings, Inc. NYSE: EXH

Steel Dynamics, Inc. Nasdaq: STLD

Western Refining, Inc. NYSE: WNR

© 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.