Concur draws modest enthusiasm; Theravance; Navistar, Annaly Capital better; Ford down

By Rebecca Melvin

New York, March 30 - An offering of convertibles from Concur Technologies Inc., a maker of expense reimbursement software, was higher bid in the gray market Tuesday by just half a point, with offers wider at 102.5. Investors weighed the company's $250 million offering, viewed as a solid credit that would have been more appealing with cheaper valuation.

The $250 million Concur offering was seen pricing after the market close.

"Hedge players are saying that it looks pretty attractive. It's a decent credit and vol. and there's a full rebate on the borrow," a New York-based sellside desk analyst said.

But another sellsider said, "It's a decent credit, though some investors prefer Salesforce.com Inc." Salesforce priced $500 million of 0.75% convertibles in January.

Theravance Inc.'s convertibles were in trade and higher after Piper Jaffray initiated coverage on the biopharmaceutical company's equity at overweight, citing a one-year forward P/E multiple of 32.5 times applied to its 2014 fully taxed diluted non-GAPP earnings-per-share estimate of $1.06, discounted to 2010 at 30% per annum.

Navistar International Corp. and Annaly Capital Management Inc. were also both trading a lot for those names and better, New York-based sellside traders said.

Ford Motor Co. convertibles were down a little, but Cemex SAB de CV extended gains.

Secondary activity light

Trading activity in the secondary market was light on the Passover holiday and ahead of Friday when financial markets will be closed in observance of Good Friday.

Stocks wavered in light volume as well, with the Dow Jones Industrial Average settling up just 11.56 points, or 0.11%, at 10,907.42; the Nasdaq Stock Market added 6.33 points, or 0.26%, to 2.410.69; and the S&P 500 index ended nearly unchanged, or down 0.5 point, at 1,173.27.

In the primary market, Corporate Office Properties Trust launched a $200 million offering of 20-year exchangeables after the market close. That paper, being sold via RBC Capital Markets Corp. and J.P. Morgan Securities Inc., was talked to yield 3.5% to 4% with an initial conversion premium of 20% to 25%.

Concur modeled slightly cheap

Various valuations were cited for Concur's $250 million of five-year convertibles, which were talked to yield 2.25% to 2.75% with an initial conversion premium of 22.5% to 27.5%.

It was 100.625 bid, 102.5 offered in the gray market ahead of pricing. Earlier, the paper was offered at 102.5, with no bid.

"It's a clean credit," a Connecticut-based sellsider said, "but stock realizing a low vol. doesn't model very cheap. A $2 billion market cap on a software stock isn't a lot of cushion to justify a tight spread."

Most people applied a credit spread of 400 basis points to 500 bps over Treasuries, with a 25% to 30% vol., which made the paper model between 101.5 and 102.5 at the midpoint of talk.

Using 475 bps over Treasuries and a 30% vol., it modeled 2.2% cheap, according to a Connecticut-based sellside analyst, who added that he didn't "see anything wrong" with being as tight as Treasuries plus 400 bps.

"I was just a little conservative due to the potential acquisition the company may make with the proceeds," the analyst said.

Goldman Sachs & Co. and Deutsche Bank Securities Inc. were selling the Rule 144A deal for the Redmond, Wash., provider of on-demand Employee Spend Management services.

Proceeds are earmarked for general corporate purposes, including potential acquisitions and strategic transactions, and to fund the cost of convertible note hedge transactions.

Theravance adds

Theravance's 3% convertibles due 2015 traded at 86 versus a share price of $13.25 during the session, according to a New York-based sellside desk analyst. According to Trace data, they were up 1.9 points to 86.4.

Shares of the San Francisco-based biopharma, focused on respiratory disease therapeutics and bacterial infections, ended up 38 cents, or 2.8%, at $13.64.

Piper Jaffray initiated coverage on Theravance equity with an overweight and a 12-month price target of $16.00.

Theravance is developing a once-daily treatment for asthma and COPD called Relovair, which is a more convenient replacement for Advair.

"The Street is focused on uncertainty regarding regulatory requirements for approval of [long acting beta-2 agonists] in asthma and the likely delay of Vibativ approval in HAP. We believe investors are better served focusing on the $3 billion plus market opportunity for Relovair in COPD in the U.S. and Europe and asthma in Europe only, as Theravance could collect an annual royalty of 15% on sales up to $3 billion and 5% thereafter," Piper Jaffray analysts M. Ian Somaiya, Michael E. Ulz and Sasha Blaug wrote in a note that was published Monday.

The analysts modeled sales of $3.1 billion in 2017, with Theravance collecting a royalty of $453 million.

"Our estimates for peak sales are half the $8 billion generated by the less convenient Advair in 2009 and reflect generic entry," the analysts said.

There is late-stage drug data expected in less than a year from phase 3 trials of Relovair in COPD to be released in early 2011.

"We expect data to mirror phase 2b results, which demonstrated that '444 (LABA) led to statistically significant increases in lung function versus placebo as measured by FEV1 for the treatment in asthma (269-309 ml; p<0.05) and COPD (138-194 ml; p<0.05)," the analysts wrote.

Phase 3 Relovair asthma trials are expected to begin soon.

Cemex up, Ford lower

Cemex's 4.875% convertibles, which priced last week, traded at 104 versus a share price $10.40 on Tuesday, compared to 103.25 versus a share price of $10.25 on Monday and 102.25 versus a share price of $10.05 on Friday.

Shares of the Monterrey, Mexico-based cement company ended higher by 7 cents, or a little more than half a percentage point, to $10.40 on Tuesday.

Meanwhile, Ford's newer 4.25% convertibles due 2016 traded at 156.5 versus a share price of $13.30, compared with 159.5 versus a share price of $13.60 on Monday.

Shares of the Dearborn, Mich.-based automaker moved lower by 29 cents, or 2%, to $13.28.

Mentioned in this article:

Annaly Capital Management Inc. NYSE: NLY

Cemex SAB de CV NYSE: ADRs: CX

Concur Technologies Inc. NYSE: CNQR

Corporate Office Properties Trust NYSE: OFC

Ford Motor Co. NYSE: F

Navistar International Corp. NYSE: NAV

Theravance Inc. Nasdaq: THRX

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