New Quidel lifts from issue; PROS on tap; BPZ slides to low 30s; energy sector firmer

By Rebecca Melvin

New York, Dec. 3 – Quidel Corp.’s new 3.25% convertibles traded up a point or two on Wednesday after the San Diego-based diagnostic testing company priced $150 million of the six-year senior notes at the cheap end of the talked coupon range and at the midpoint of the premium range.

Quidel was seen at 101.5 bid, 102.25 offered with the underlying shares at $23.80.

During the session, Quidel’s shares fluctuated, climbing from early lows, but pulling back at late morning, and the new notes followed suit, a New York-based trader said.

Also in the primary market, Cyan Inc. launched a small offering of five-year convertible senior notes and related warrants via bookrunner Jefferies & Co. LLC. Further details of the $50 million deal were not immediately available.

After the market close, PROS Holdings Inc. launched a $125 million offering of five-year convertible senior notes to yield 1.75% to 2.25% and with an initial conversion price of 27.5% to 32.5%.

Back in the secondary market, BPZ Resources Inc. was in focus as the underlying shares of the Houston-based oil and gas company slid by as much as 50% to as low as 17 cents. The BPZ convertibles traded down to as low as 32.

The energy sector overall was described as firmer, however.

Goodrich Petroleum Corp.’s 5% convertibles due 2032 bounced back a couple of points on Wednesday to 57.5, following a plunge in the securities of the Houston-based oil and gas exploration and development company on Monday and Tuesday.

The energy sector has been a primary focus of the convertibles market this week, and it has been weak amid growing expectations that the global oil market may not return to normalcy any time soon.

“A lot of the energy names were stabilizing, as oil prices lifted,” a New York-based trader said Wednesday. “They are firmer with oil higher.”

West Texas Intermediate crude was at $67.54 a barrel on Wednesday, which was up 66 cents from Tuesday. Brent crude for January delivery rose 62 cents to $71.16, which was up from a five-year low below $68, notched on Monday.

But since June, crude oil prices have dropped nearly 40%, and a second convertibles trader, focused on distressed debt, said that the market remains unstable.

“Some people are jumping and some people are dipping in their toes,” he said. “Things are starting to trade.”

New Quidel adds

Quidel’s new 3.25% convertibles traded up to 101.5 bid, 102.25 offered with the underlying shares at $23.80 on Wednesday.

Quidel shares started the day lower but ended up a nickel, or 0.2%, at $23.80.

“They priced it reasonably cheap, and it has done pretty well,” a New York-based trader said at late morning.

“There is still demand for well-priced paper,” the trader said.

Using a credit spread of 500 basis points over Libor and 30% vol., the Quidel convertibles deal was seen worth 103.4 at the midpoint of talk ahead of pricing.

Quidel priced $150 million of the six-year convertible senior notes with a 3.25% coupon and a 35% initial conversion premium.

There is a $22.5 million greenshoe for the deal that was sold by joint bookrunning managers BofA Merrill Lynch and J.P. Morgan Securities LLC.

Co-managers included William Blair & Co. Inc., Canaccord Genuity Inc., Cowen and Co. LLC and Piper Jaffray & Co.

The notes are non-callable and have contingent conversion if shares exceed 130% of the conversion price for 20 out of 30 trading days. There is takeover protection and net share settlement.

Proceeds will be used for working capital and other general corporate purposes, which may include acquisitions of products, technologies or businesses, and opportunistic common stock repurchases.

Quidel is a San Diego-based provider of rapid diagnostic testing solutions and cellular-based virology assays.

PROS to price

PROS, a Houston-based provider of pricing and margin optimization software, plans to price $125 million of five-year convertible senior notes after the market close on Thursday.

The notes were talked to yield 1.75% to 2.25% with an initial conversion premium of 27.5% to 32.5%, according to market sources.

The Rule 144A offering has an $18.75 million greenshoe and was being sold via Goldman Sachs & Co. and Deutsche Bank Securities Inc. as joint bookrunners.

The notes are non-callable and have takeover and dividend protection.

In connection with the offering the company plans to enter into privately negotiated convertible note hedge and warrant transactions, or a call spread, with initial purchases of the bonds.

A portion of the proceeds will be used to pay the net cost of the call spread. Remaining proceeds will be used for general corporate purposes, including working capital, capital expenditures, potential acquisitions and strategic transactions.

BPZ Resources slides

BPZ’s 8.5% convertibles were offered in the 40s and traded at 41 before sliding further to 32 in trade, a trader said.

There were a couple of “decent-sized” trades, the trader said.

A second trader said, “It’s the pain name of the day today.”

Previously the BPZ convertible was in the 60s and earlier in the week it was indicated in the 50s but didn’t trade.

Shares of BPZ ended down 12 cents, or 34%, at $0.23.

What drove the securities lower and whether they found a level wasn’t clear.

“It has to figure itself out still,” a trader said.

Mentioned in this article:

BPZ Resources Inc. NYSE: BPZ

Cyan Inc. Nasdaq: CYNI

Goodrich Petroleum Corp. NYSE: GDP

PROS Holdings Inc. Nasdaq: PROS

Quidel Corp. Nasdaq: QDEL

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