Gilead active, weaker on new notes; AMD mostly quiet, higher on tender; Alcoa trades in line

By Rebecca Melvin

New York, July 26 - The existing convertibles of Gilead Sciences Inc. were active Monday and weaker after the Foster City, Calif.-based biopharmaceutical company launched a $2.2 billion offering of new convertible notes in four- and six-year tranches.

"The new Gilead deal definitely looks cheaper" than the old ones, a Connecticut-based trader said.

Both new issues were bid only at 100.25 in the gray market ahead of final terms, which were seen coming after the close of markets Monday.

Advanced Micro Devices Inc. saw its 6% convertibles higher, near par, but mostly quiet after the Sunnyvale, Calif.-based maker of computer processor chips launched a cash tender offer for up to $800 million of the 6% bonds.

Alcoa Inc. traded in line after the Pittsburgh-based aluminum maker said it had begun two tender offers for three series of notes.

Elsewhere, biomedical testing instruments maker Beckman Coulter Inc. was active and bounced back from a steep drop on Friday when the Brea, Calif.-based company announced earnings.

Ford Motor Co. improved again Monday, with the Ford 4.25% convertibles due 2016 up to 155 versus a share price of $13.00, compared to 139.5 versus a share price of $11.50 last Tuesday, according to one sellsider.

Overall, convertible paper was better to buy, meaning the bid was reasonably strong, but uncertainty is putting a damper on how much traders want to chase, according to one sellsider.

Gilead active, weaker

Gilead's 0.5% notes due 2011, or the A paper, was at 102.86 versus a share price of $33.55, according to a New York-based trader, who put the paper lower by a point on a hedged basis.

A second trader said that the Gilead As traded at 103 versus a share price of $33.00, which was "in" by 0.75 point.

Both of those prices on the As were about the same with the difference being the spread, one sellsider said.

Gilead's 0.625% convertible bonds due 2013, or the B paper, traded at 109 versus a share price of $33.15, which was down about 2 points on a hedged basis from 112.5 versus a share price of $33.75 on Friday, a sellsider said.

A second trader said his market on the Gilead A paper was 108 versus a share price of $33.00.

Traders said the A paper was down a point and the B paper was down 2 points.

Gilead shares ended the day nearly flat, or lower by 4 cents at $33.39.

The existing Gilead bonds "deserved to come in anyway, especially because now there are four boring Gilead deals out there," one trader said.

Gilead's new paper eyed

Gilead planned to price $2.2 billion of convertible senior notes in four- and six-year tranches after the market close.

The offering includes $1.1 billion of four-year paper talked to yield 1.125% with an initial conversion premium of 35% and $1.1 billion of six-year paper talked to yield 1.75% with an initial conversion premium of 35%, according to market sources.

There is a greenshoe of $300 million.

The Rule 144A note offering was being sold by bookrunners J.P. Morgan Securities Inc. and Goldman Sachs & Co.

Gilead expects to use at least $1 billion of the proceeds to repurchase shares of its common stock in private, off-market transactions.

Proceeds from the offering, together with any proceeds from concurrent warrant transactions, will be used to fund convertible note hedge transactions.

Remaining proceeds will be added to Gilead's working capital and will be used for general corporate purposes, including additional repurchases of its common stock and repayment of some of Gilead's existing debt.

Gilead intends to enter into convertible note hedge transactions with one or more of the option counterparties. Gilead also plans to enter into warrant transactions with the same option counterparties.

The company announced last week a new treatment that looks promising in protecting women from contracting the AIDS virus.

AMD up on tender

AMD's 6% convertible due 2015 added about 3 points to trade at 99.75 after the company announced its tender offer for the 6% paper due 2015.

AMD's 5.75% convertibles due 2012 were up a point or more to 100.625.

Shares of the company climbed 25 cents, or 3.2%, to $8.07.

"They are trading right around par. [There's] not a lot of activity," a Connecticut-based trader said of the AMD 6s during the trading session.

The company will pay par for the 6% notes, plus interest up to but excluding the payment date.

The tender offer will expire at midnight ET on Aug. 20.

If more than $800 million principal amount of convertibles is tendered, the company will accept convertible for purchase on a pro rata basis.

AMD intends to finance the tender offer with the proceeds from its $500 million private offering of senior notes, along with its existing cash.

AMD was also talking $500 million of 10-year straight notes to yield 7.5% to 8%.

Alcoa trades in line

Alcoa's 5.25% convertible due 2014 traded at 189 versus a share price of $11.35 on Monday.

Shares of the aluminum company traded up to as high as $11.37 but ended lower but still in positive territory by 18 cents, or 1.6%, at $11.23.

A sellsider said the convertible notes were trading in line with a move in the underlying shares.

Alcoa said Monday it priced $1 billion in notes to buy back notes with upcoming maturity dates.

The company sold 6.15% notes due 2020 to pay down its 6.5% notes due 2011, 6% notes due 2012 and 5.375% notes due 2013.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Alcoa Inc. NYSE: AA

Beckman Coulter Inc. NYSE: BEC

Ford Motor Co. NYSE: F

Gilead Sciences Inc. Nasdaq: GILD

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