Accuray adds on debut; Alere falls after lowered forecast; DryShips convertibles for sale

By Rebecca Melvin

New York, July 27 - Accuray Inc.'s newly priced 3.75% convertibles traded up in the secondary market Wednesday but were somewhat weighed by lower shares after the Sunnyvale, Calif.-based developer of robotic radiosurgery for the treatment of tumors priced an upsized $100 million of convertibles at the mid to rich end of talk.

The new Accuray convertibles were marked at 101 bid, 101.5 offered at the close with the share price at $71.15, a syndicate source said.

Otherwise earnings took a great deal of focus as the broader markets turned quite shaky and sold off into the close. The Nasdaq stock market ended 2.7% down on the day, while the S&P 500 stock index ended down 2% and the Dow Jones Industrial Average skidded 199 points, or 1.6%.

Alere Inc.'s convertibles and shares plunged after the Waltham, Mass.-based maker of diagnostic equipment cut its full-year earnings forecast.

San Diego, Calif.-based medical devices maker NuVasive Inc., a competitor with Alere, slipped Tuesday on a lowered 2011 earnings-per-share forecast.

DryShips Inc.'s convertibles were heavily for sale during the session, and slipped on an outright basis, but dollar neutral they held their value. Shares of the Athens, Greece-based dry bulk shipping company spent a brief part of the session in positive territory. On Tuesday DryShips announced a merger agreement that will foster consolidation in the crowded dry bulk shipping business.

Genco Shipping & Trading Ltd., a New York-based dry bulk shipping company, looked strong early in the session, having traded at 73 versus $6.00 per underlying share. That compared to a 72 price on Tuesday. But shares slumped into the close in tandem with the broader markets.

In the primary market, Fidelity National Financial Inc. launched a $300 million offering of seven-year convertible senior notes that were expected to price after the market close.

The weak broader markets spurred some speculation about whether the Rule 144A deal coming via joint bookrunners Bank of America Merrill Lynch and J.P. Morgan Securities LLC would in fact be able to price.

"The overall market is getting real shaky," a New York-based sellside trader said regarding his opinion that the deal would have a difficult time coming to market.

Bank of America Merrill Lynch wasn't available to comment on the status of the deal.

But another market source said that given the strong demand for convertible paper that the market has experienced recently it seemed likely that any deal of this size coming from a BB or better company was likely to be a home run.

"I imagine launching today would be a little scary," the market source said.

The broader markets were battered by weak earnings and economic data and faltering talks in Washington about the U.S. debt ceiling decision as the Aug. 2 deadline looms.

Among new data, durable goods orders fell unexpectedly in June, the second large drop in the past three months, by 2.1%, on weak airplane and automobile orders, according to the Commerce Department, and the Federal Reserve's Beige Book report showed the pace of the recovery slowing in most districts surveyed, indicating the economy was not bouncing back as the year's second half began.

Accuray adds on debut

Accuray's newly priced 3.75% convertibles were marked at 101 bid, 101.5 offered, versus the closing share price of $7.15, at the end of their first trading session after trading earlier at 102 bid, 103 offered.

The bonds were 102 bid, 103 offered pre-open before being weighed down by weaker shares.

The performance was "at least partially a function of the [broader] market," a syndicate source said.

Accuray shares fell 43 cents, or 5.7%, during the session.

The paper was upsized to $100 million from an originally talked $75 million base deal, and the book, which was multiple times oversubscribed, was described as "pretty standard," with an approximately 50-50 split between outright and hedged investors, a syndicate source said.

The new convertibles priced with a 3.75% yield and an initial conversion premium of 25%, which was the midpoint of coupon talk and the rich end of premium talk.

There is a $15 million greenshoe.

UBS Securities LLC was the bookrunner.

The notes will be non-callable for three years and then provisionally callable subject to shares being 130% of the conversion price. There are no puts and no contingent conversion.

Proceeds are intended for general corporate purposes, including investing strategically in expanding business and new product initiatives.

Alere falls on new guidance

Alere's 3% convertibles due 2016 were heard early Wednesday at 101 versus an underlying share price of $31.00, which compared to 111 versus a share price of $36.10 on Monday, a New York-based sellside desk analyst said.

The Alere 3% convertibles also printed at 101.174, which was down 6 points outright, according to Trace data.

Shares of the Waltham, Mass.-based medical device company plunged $4.47, or 13%, to $29.61 on Wednesday.

Like competitor NuVasive Inc. a day earlier, Alere posted disappointing earnings and lowered full-year guidance.

Alere lost $4.7 million, or 10 cents a share, compared to a net loss of $8.3 million, or 17 cents, a year ago.

Excluding items, the company earned 46 cents per share.

Revenue for the company, whose products include the point of care influenza diagnostic test device, rose 8% to $567.2 million. It was hurt by lower-than-expected results from its health management segment.

The company expects that circumstances that negatively affected this segment's second-quarter performance will persist for the balance of the year, and it revised its full-year 2011 adjusted cash-basis net income per diluted share guidance to a range of $2.50 to $2.60 per share.

DryShips holds up on hedge

DryShips' 5% convertibles due 2014 traded at 84.25 versus an underlying share price of $3.75, according to a New York-based sellside desk analyst.

The DryShips convertibles were also said to trade at 83.75 versus an underlying share price of $3.72, which compared to 83.25 versus a share price of $3.73 on Tuesday.

Shares of the company were on the rise intra-session, possibly boosted by news of Tuesday's merger, which represents consolidation in the dry bulk shipping sector to the benefit of DryShips. But the shares ended the session down 4 cents, or 1%, at $3.73.

The bonds were described as "heavily for sale," according to a New York-based sellside trader.

Nevertheless, they were described as about 0.5 point better delta neutral.

The paper is held by both outright and hedged players and moves on about a 60% delta.

In news from the company, DryShips announced that it and OceanFreight Inc. have entered into a definitive agreement for DryShips to acquire the outstanding shares of OceanFreight for consideration of $19.85 per share, consisting of $11.25 in cash and 0.52326 of a share of common stock of Ocean Rig UDW Inc., an ultra deepwater drilling serves company that is 78% owned by DryShips.

The transaction will allow DryShips to acquire high-quality, modern drybulk vessels with attractive long-term charters. OceanFreight owns six vessels including four Capesize and two Panamax vessels. DryShips will also benefit by assuming OceanFreight's attractively priced credit facilities.

Fidelity National to price

Fidelity National, with a $3.6 billion market capitalization, planned to price $300 million of seven-year convertible senior notes after the market close on Wednesday that were talked to yield 3.75% to 4.25% with an initial conversion premium of 32.5% to 37.5%.

With the steep pull back in the broader market there was some concern about whether it could be successfully marketed. No gray market was heard from market sources.

The Jacksonville, Fla.-based insurance holding company planned to buy back $75 million of shares with a portion of the proceeds and other resources, but common shares slumped, nevertheless, settling down 39 cents, or 2.3%, to $16.27 on the day.

Proceeds will also be used to repay debt and for general corporate purposes.

The newly acquired shares may be sold as part of hedging transactions with certain investors in the notes.

The Rule 144A deal has an over-allotment option for up to an additional $45 million of notes and is being sold via joint bookrunners Bank of America Merrill Lynch and J.P. Morgan Securities LLC, with co-managers Wells Fargo Securities LLC, USBC, Stephens and Jefferies & Co.

The notes are non-callable and have no puts. There is takeover protection and net share settlement.

Mentioned in this article:

Accuray Inc. Nasdaq: ARAY

Alere Inc. NYSE: ALR

DryShips Inc. Nasdaq: DRYS

Fidelity National Financial Inc. NYSE: FNF

Genco Shipping & Trading Inc. NYSE: GNK

© 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.