NII Holdings flat to lower on scuttled wireless agreement; EMC mixed; Cubist deal on tap

By Rebecca Melvin

New York, Oct. 18 - NII Holdings Inc.'s convertibles were flat to slightly lower on Monday after the company and Group Televisa SAB officially announced that they have mutually agreed to terminate a previously announced wireless and investment agreement.

The slip extended last week's move on rumors of the news, but overall the bonds - considered a credit play - held up better than the underlying shares.

EMC Corp. was mixed in active trade, which was an extension of last week's trade on rumors that the Hopkinton, Mass.-based data storage company could be acquired by Oracle Corp.

The two EMC sister convertible issues moved slightly, with the near-dated paper fractionally lower and the far-dated notes up just slightly, a New York-based sellside analyst said.

Allergan Inc. wasn't heard in active trade, but the paper was higher in line with a jump in the underlying shares on news that U.S. regulators approved its Botox therapy to treat migraine headaches.

Great Atlantic & Pacific Tea Co. was also quiet, although slightly higher, as the name is still in focus after news last week that it is hiring advisers for a potential debt restructuring.

Secondary muted

Overall, trading in the secondary market was described as quiet, with "nothing going on."

"Maybe the market is taking a breath before earnings kick in hard this week," a Connecticut-based sellside analyst said.

The primary market was also quiet during the session, but after the close, Cubist Pharmaceuticals Inc. launched a $250 million offering of seven-year convertible senior notes that were seen pricing after the market close on Tuesday.

The small Alon USA Energy Inc. perpetual convertible preferreds offering also was not heard again Monday after failing to price as planned on Thursday.

But a syndicate sources said the Dallas-based petroleum products marketer's $60 million offering was still alive but not imminent.

It might be "revisited, if and when things get better," the syndicate source said. "It was a small deal to begin with and will probably get done on a one-off basis."

Such was not the case for the change of plans of General Growth Properties Inc. The Chicago-based real estate investment trust has decided against its previously announced offering of mandatorily exchangeable notes in favor of a post-bankruptcy emergence offering of common stock.

"It's cleaner and simpler, so it makes sense for the company rather than to do a yield, half equity deal," a New York-based sellsider said.

NII Holdings edges lower

NII Holdings' 3.125% convertibles due 2012 traded at 96.875 versus a share price of $37.39 on Monday, according to a New York-based sellsider.

"That's down on the day about three teenies," the sellsider said.

"It's a nice yield for a big, huge company," the sellsider said.

The Reston, Va.-based wireless communications company has a market cap of about $6.27 billion.

The convertibles are considered a credit play, and there is no delta, the sellsider said.

Last week, "people got spooked that the deal was off," the sellsider said.

On Monday, shares of the company fell another $1.02, or 2.7%, to $37.01 on official word that the agreement was being canceled.

But soon after word that it was no longer working with Televisa, after first inking the agreement last February, NII and its subsidiary Nextel Mexico said they "will continue to execute on a strategy that calls for the deployment of a third generation network across Mexico with the first phase of the commercial launch of that network expected to occur in the next 12 to 18 months," according to a release.

Nextel Mexico's 3G plan will expand coverage and offer customers more service choices, the release said.

Last week the convertibles traded at 96.75, which represented a widening in price by about 40 basis points to a spread of 442 bps to 482 bps over comparable Treasuries.

Shares have gone to about $37 from about $43 since the news.

"It has extremely little sensitivity [to shares]," a New York-based sellside trader said of the NII Holdings convertibles.

A&P mostly quiet

The A&P 6.75% convertibles due December 2012 traded at 51.975 early Monday, which was up 0.975 point on the day, according to Trace data.

But traders said there was nothing trading in the name to speak of on Monday.

"Liquidity has really dried up on that one in the last month or so. People don't know what to do with it," a New York-based sellside analyst said.

The company's hiring of advisers that made headlines last Wednesday "was not exactly shocking," the sellsider said.

Shares of the ailing supermarket chain, based in Montvale, N.J., are down 70% for the year to date, closing Monday at $3.16, which was up 9 cents, or 2.9%.

"There's no edge now," the sellsider said. "A couple of months ago there were a lot of different scenarios playing out."

Allergan quiet, in line

Allergan's 1.5% convertibles due 2026 were seen at 116.5 versus a share price of $72.90, which was up from 114.5 bid, 115.5 offered a week ago, according to a New York-based sellside desk analyst.

Shares of the Irvine, Calif.-based health care company closed higher by $3.75, or 5.5%, to $72.61 on Monday. The shares were $67.90 a week ago.

The Food and Drug Administration late Friday approved the specialty health care company's Botox drug to prevent chronic migraine headaches.

Botox was initially a cosmetic treatment for wrinkles and frown lines but has been approved for other types of uses including certain types of muscle spasms.

Cubist to price

Cubist, a Lexington, Mass.-based biopharmaceutical company, launched a $250 million offering of seven-year convertibles after the close of markets. Goldman Sachs & Co. and Morgan Stanley are the joint bookrunners.

Deal talk was for a coupon of 2.25% to 2.75% and the initial conversion premium at 22.5% to 27.5%, according to market sources.

There is an over-allotment option for a further $37.5 million.

Proceeds will be used to repurchase a portion of Cubist's 2.25% convertible notes due 2013 through privately negotiated transactions. Remaining proceeds will be used to build its pipeline via internal and external sources and for working capital and other general corporate purposes.

In addition, a portion of remaining proceeds may be used to acquire or invest in businesses, products, services or technologies complementary to current business, through mergers, acquisitions, in-licensing, joint ventures and similar strategic transactions.

Mentioned in this article:

Allergan Inc. NYSE: AGN

Alon USA Energy Inc. NYSE: ALJ

Cubist Pharmaceuticals Inc. Nasdaq: CBST

EMC Corp. NYSE: EMC

Great Atlantic & Pacific Tea Co. NYSE: GAP

NII Holdings Inc. Nasdaq: NIHD

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