Antigenics, Alexion deals emerge; Charter slides on CEO's exit; Computer Network gains

By Ronda Fears

Nashville, Jan.18 - Charter Communications Inc. took a dive after chief executive Carl Vogel resigned from the St. Louis-based cable company, with the stock closing off by more than 6%, sending its convertible debt sharply lower on an outright basis, but hedged holders said the credit did "fine" on swap.

Merger news Tuesday sent Computer Network Technology Corp.'s convertibles higher even as the stock declined on the perception that a $235 million price tag for the company was too low. But convertible players were comfortable in that the notes would be assumed by acquirer McData Corp., whose convertibles were steady on the news.

UnitedGlobalCom Inc. shares also were lower Tuesday on news that Liberty Media International Inc. was buying the remaining 47% equity stake in UnitedGlobalCom that it does not already own. But nothing was heard in the way of trading in the UnitedGlobalCom convertible, a 1.75% issue that is a rarely seen issue anyway.

A couple of smaller new deals, from Alexion Pharmaceuticals Inc. and Antigenics Inc., also surfaced from the primary side of the market with both scheduled for Wednesday's business. Then, on Thursday, the Celanese Corp. $200 million perpetual convertible preferred is at bat alongside its initial public offering, with the convertible expected to carry a 4.0% to 4.5% dividend and 18% to 22% initial conversion premium.

Alexion to refinance 5.75s

The new Alexion issue will refinance its 5.75% convertibles due 2007, replacing that issue with $125 million of seven-year non-callable convertible notes indicated with a coupon in the neighborhood of 1.125% to 1.625% and an initial conversion premium of 30% to 35%.

The new deal is pricing after the close Wednesday.

Cheshire, Conn.-based Alexion is engaged in the discovery of treatments for hematological, cardiovascular and autoimmune disorders. Alexion shares on Tuesday climbed $1.85, or 8.08%, to close at $24.48. News of the convertible offering sent the stock down by $1.17, or 4.78%, in after-hours trading.

The Alexion 5.75% convertible has been at around par for some time, dealers said, and was unchanged on the news.

Antigenics launches small deal

Antigenics was preparing to market $60 million of 20-year convertible notes talked to yield 4.75% to 5.25% with a 35% to 40% initial conversion premium with the pricing also scheduled after the close Wednesday.

It was being offered 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.

Antigenics shares closed Tuesday up 49 cents, or 5.4%, at $9.44, and in after-hours trading slipped by 15 cents, or 1.59%.

Based in New York, Antigenics' most advanced product candidate is Oncophage, which is in clinical trials as a treatment in renal cell carcinoma and in melanoma. The company has been required by the Food and Drug Administration to do another round of Phase III clinical trials for the treatment, a development that could delay the potential launch of the drug until 2008. Results from recently completed additional Phase III clinical trials of the treatment for kidney cancer are expected in early 2005, the company has said.

Charter 5.875s off on CEO exit

Charter's new 5.875% convertibles, which were sold last month to help refinance debt coming due this year and next, dropped about 3.25 points on the news that CEO Vogel resigned. But hedge fund traders said it was not a total surprise, and the drop in the stock helped the converts remain "fairly steady"

The 5.875s ended Tuesday at 104.5 bid, 105.5 offered while the underlying stock lost 13 cents, or 6.34%, to close at $1.92.

Charter named Robert May, a former executive at HealthSouth Corp., to replace Vogel but is searching for a permanent replacement as well. May said in a conference call on the event that the company's main focus will continue to be growing top line results along with boosting cash flow while also "opportunistically" improving the balance sheet.

How Vogel's departure - the third senior management exit from Charter in the past six months - will impact majority stakeholder Paul Allen's investment in the cable company, and the ultimate effect on Charter's future, is of utmost concern, convertible players said.

"From what I understand, Paul Allen and Vogel did not get along. Vogel's contract was set to expire later this year, and I think people were wondering whether or not he would stay on anyway," a buyside analyst said. "Keep in mind that Allen and Jerry Kent (Charter's CEO prior to Vogel) butted heads as well, prior to Kent's departure in 2001."

A buyside trader said the Allen-Vogel clash centered on the approach to trimming Charter's $18 billion debtload as it stood in September.

"Apparently," she said, "the differences between Allen and Vogel came down to Vogel wanting a more aggressive approach to cut the debt, permanently, while Allen had pushed to extend maturities." As it turned out, refinancing was the path taken by Charter, which sold $1.5 billion of new debt in November and December to refinance upcoming maturities such as its convertibles.

Computer Network up 7 points

In ongoing merger activity, storage-technology developer McData said it would buy Computer Network Tech for $235 million, in stock and the assumption of debt.

McData said it would exchange 1.3 shares of its stock for each share of Minneapolis-based Computer Network Tech, putting the stock at about $5.53 a share - a discount to the $6.62 closing price from Friday. That pressured Computer Network Tech shares, which dropped $1.00 on the day, or 15.11%, to $5.62.

But the Computer Network Tech 3% convertible due 2007 was quoted up 7 points by one sellside dealer, who pegged the issue at 94 bid, 95 offered.

Both companies' boards have cleared the deal, which also requires shareholder approval.

McData's 2.25% convertible due 2010 was quoted off about 0.5 point on the news, while the stock ended lower by 11 cents, or 2.59%, at $4.36.

UnitedGlobal, Liberty unite

Another merger of sorts announced Monday in which Liberty Media will buy the UnitedGlobal stock not already owned, failed to stir any action in the convertible universe, buyside players said.

The Liberty Media/UnitedGlobal combination won't trigger the change-of-control covenant in the indenture for the UnitedGlobal 1.75% convertibles, but that issue is seldom seen or mentioned on convertible desks. One buyside trader said he'd not heard anything in the issue Tuesday, "nor for some time."

UnitedGlobal shares, though, closed Tuesday down 4 cents, or 0.41%, at $9.60.

Liberty Media has a couple of exchangeable issues that trade on convertible desks, but those were silent Tuesday as well. Liberty Media's class A shares gained 54 cents on the day, or 1.24%, to $44.23, and the class B shares added 16 cents, or 0.34%, to $46.40.

Terms of the merger value Denver-based UnitedGlobal at an estimated $7.4 billion. In at least one capital-raising action, sources in the bank loan market told Prospect News on Tuesday that Liberty Group was expected to launch a new $330 million credit facility on Feb. 2.

© 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.