Alexion goes to 102; Antigenics sweetens terms; Charter exodus continues; auto, airline paper lower

By Ronda Fears

Nashville, Jan.19 - With two new issues from biotech firms at bat after Wednesday's close and a private placement convertible from ViroPharma Inc. getting approved, sellside traders commented about renewed interest in some of the biotech issues with fat coupons.

Alexion Pharmaceuticals Inc.'s pending convertible was bid up 2 points over issue price in the gray market, buyside convert traders said, but Antigenics Inc. had to sweeten terms on its deal - fixing the coupon at the widest end of the original range but improving the premium by 15 percentage points - to bring in orders.

For the most part, though, the convertible market was easier in tandem with stocks.

Charter Communications Inc. dropped sharply for a second day following the departure of chief executive Carl Vogel from the St. Louis-based cable company. Outright holders were selling the converts, which pushed the 5.875% issue down about 4.5 points Wednesday, traders said.

There were sellers in the General Motors Corp. convertibles and buyers, too, on the top automaker's earnings, which analysts said were "not that bad, really." Holders were exiting the 5.25% bonds to buy the 6.25% bonds, a dealer said, while GM stock barely moved on the results.

Ford Motor Co. also was lower ahead of its earnings on Thursday. A DaimlerChrysler AG-linked issue that debuted out of Europe on Thursday, though, was higher as buyers "flocked to it."

Transportation sector activity was mostly in the auto paper, traders said, as few airline converts saw any traffic on earnings from Northwest Airlines Corp. and AMR Corp. Both posted whopping losses, but that was no big surprise, traders said. The stocks lost considerable ground, but traders said the convertibles dropped only about 0.75 to 1 point. Delta Air Lines Inc., which is due to report earnings Thursday, was a little lower, too, but traders said none of the airline paper traded much Wednesday.

Bucking the downward trend in the market were Mirant Corp. and EDO Corp. Mirant moved up and saw a lot of action on its bankruptcy plan, while EDO convertibles rose in tandem with the stock that was upgraded by Friedman Billings & Ramsey and AmTech Research.

Alexion deal seen 1.7% cheap

The new Alexion issue traded steadily higher in the gray market throughout Wednesday's session, buyside traders said. The new $125 million issue will refinance its 5.75% convertibles due 2007 with a seven-year non-callable convertible talked to yield 1.125% to 1.625% with a 30% to 35% initial conversion premium.

Merrill Lynch analysts put the new Alexion convertible 1.7% cheap at the middle of price talk, using a 52% stock volatility and a credit spread of 600 basis points over Treasuries. Given current scarcity of new deals, Merrill analysts anticipate the issue will price at the middle of price talk.

The pending issue was last seen at about 102 in the gray market, a convert trader said. Alexion shares on Wednesday lost $1.18, or 4.82%, to end at $23.30.

Cheshire, Conn.-based Alexion is engaged in the discovery of treatments for hematological, cardiovascular and autoimmune disorders.

Antigenics sweetens price talk

Another biotech name, Antigenics, also was preparing to price a small $60 million deal after the closing bell. But before that, buyside sources said the guidance for the issue was sweetened to a 5.25% coupon, up 20% to 25% from 4.75% to 5.25%, up 35% to 40%.

The resistance, one buyside trader said, was two-fold: First, there was very little stock borrow in Antigenics; and, second, the New York-based company has had trouble since the fall of 2003 in getting Food and Drug Administration approval for Phase III trials in its Oncophage product as a treatment in renal cell carcinoma and in melanoma.

"The company itself refers to Oncophage as its 'most advanced product candidate' and they have been trying to get approval on the clinical trial for over a year now," the trader said. "We're not even talking about it getting to a marketable stage now for probably 2 to 3 years, so we just feel like we need to get paid more to hold this."

Antigenics was selling the issue on swap, with up to $10 million of proceeds earmarked to concurrently buy back stock. Remaining proceeds, the company said, will be used for continued funding of clinical trials, potential acquisitions, working capital, capital expenditures and general corporate purposes.

Charter 5.875s lose 4.5 points

Charter's new 5.75% convertibles continued to get sold off as outrights exited the issue, taking some pretty hefty profits in the process although the issue fell 4.5 points Wednesday following a loss of 3.25 points the day before.

"The outrights were more than pleased when these were at 112 (a few weeks ago)," a sellside convert trader said. "Them getting around par, or even below par today, has scared some of them out of the issue."

Charter's convertibles were very active, dealers said, a day after chief executive Carl Vogel resigned from the cable company, which caused the convertibles to lose more than 3 points on Wednesday.

When asked, off-the-cuff, if Charter convertible holders were afraid the company could not survive without Vogel, one sellside trader said, sincerely, "I'm not so sure that's not the case."

He echoed comments from buyside sources on Tuesday who noted that Vogel's departure - the third senior management exit from Charter in the past six months - was yet another clash with majority stakeholder Paul Allen regarding the company's approach to slashing its massive debt burden.

Charter shares dropped Wednesday by 17 cents, or 8.85%, to close at $1.75.

Mirant convertibles gain on plan

Mirant's convertibles shot up on the Atlanta-based power firm's bankruptcy reorganization plan filed Wednesday, which virtually leaves the company in the hands of the unsecured creditors like convertible holders.

The 5.75% convertible preferreds added 2.75 points to 17.5 on the news, and the 2.25% convertible bonds rose similarly, pegged by a sellside trader at the market close at 75.75 bid, 76.25 offered. Mirant shares, however, dropped 7 cents, or 18.92%, to 30 cents in over-the-counter trading Wednesday.

Mirant anticipates emerging from bankruptcy around mid-2005.

Under the proposed plan, holders of general unsecured claims estimated at $6.7 billion would get nearly all of the reorganized company stock. The company, however, did not venture an estimate of the recovery levels for those debtholders.

UBS/DaimlerChrysler gains

DaimlerChrysler players in Europe shrugged off the headlines on auto earnings in the United States, which included prognostications about 2005 being a watershed year for the Big 3 - GM, Ford and Chrysler. Rather, market sources in London said enthusiasm was raging for the new DaimlerChrysler convert.

UBS AG sold €702.25 million of mandatory bonds, convertible into DaimlerChrysler shares, at par of €50,000 to yield 4.35% - at the tight end of guidance for a 4.35% to 4.55% coupon. The five-year non-callable bonds had been expected to fetch €650 million to €700 million.

"We hear that the new Daimler issue was priced attractively relative to the common dividend and they're bid up around 0.75 point," a sellside source in the United States said.

In London, a market source said the UBS/DaimlerChrysler issue ended the day about 1 point over par, with DaimlerChrysler shares closing on the XETRA up €0.07, or 0.2%, at €35.32. In the United States, DaimlerChrysler shares dropped alongside GM and Ford, ending off 19 cents, or 0.41%, at $45.75.

ViroPharma old 6s bid higher

ViroPharma was one of the names mentioned in context of the renewed interest in older biotech converts with fatter coupons, which one sellside convertible trader referred to as "back from the dead." ViroPharma's old 6% convertibles were bid at 91, up from the 80s on new exchange notes approval, another trader said.

The old ViroPharma 6% convertibles were bid up to the 91 area from the 80s over the past few days in anticipation of the biotech concern getting stockholder approval to exchange some 10% bridge notes sold last October with warrants for a new convertible in the private placement market.

"The new bonds do not directly impact the existing 6s of March '07 but supposedly they were bid up ... just prior to the shareholder exchange approval and could trade up ... based on the positive outcome," said a source in the convertible market.

Convertible traders said the new ViroPharma issue, which also has a $12.5 million greenshoe available now through Feb. 18, is expected to begin trading as a Rule 144A issue soon, and moreover commented that the issue sparked interest in other, older biotech convertibles with fat coupons.

The biotech firm announced Wednesday that its stockholders have approved the issuance of $62.5 million of 6% senior secured convertible notes due October 2009, in exchange for the senior secured bridge notes due October 2005 and warrants for 5 million shares of common stock that were offered in a private placement last October to help fund the acquisition of Vancocin and rights to certain Vancocin products from Eli Lilly & Co.

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