Bausch & Lomb gains; DexCom quiet on debut; Barnes absent in gray; Cypress, Developers launch deals

By Kenneth Lim

Boston, March 6 - Bausch & Lomb Inc. rose with its stock on mixed reactions Tuesday to the company's forecast for sales growth and a recall of a contact lens solution.

Barnes Group Inc. was quiet in the gray market with its planned $85 million offering of 20-year convertible senior subordinated notes seen as fair to cheap.

DexCom Inc. flew under the radar in its secondary market debut with the company's $40 million deal likely placed among a limited group of investors.

Another two new deals were announced after the market closed. Cypress Semiconductor Corp.'s planned $500 million offering and Developers Diversified Realty Corp.'s planned $400 million deal are slated to price Wednesday after the market closes.

Bausch & Lomb gains with stock

Bausch & Lomb's Libor plus 50 basis points convertible due 2023 was up a touch on Tuesday on mixed news as the company guided for a rebound in 2007 sales but recalled 12 lots of a contact lens solution product over contamination concerns.

The floating-rate convertible, which currently has a coupon of about 5.901%, traded up by about 1/8 point at 113.625 against the closing stock price of $51.72. Bausch & Lomb stock (NYSE: BOL) closed higher by 2.58% or $1.30.

"Some of the Bausch & Lombs did trade," a sellside convertible trader said. "They look a little better. The stock's up."

Rochester, N.Y.-based Bausch & Lomb said Tuesday that its 2006 revenue fell 3% to $2.29 billion, mainly due to its worldwide recall of the ReNu with MoistureLoc contact lens solution in that year. While the maker of eye health products did not report its earnings, it expects losses from its U.S. operations because of the recall. But the company expects revenue to increase by 8% to 10% in 2007.

Also on Tuesday, Bausch & Lomb said it is recalling 12 lots of its ReNu MultiPlus contact lens solution after it found higher-than-expected levels of iron that could cause the solutions to discolor and affect their shelf life. The company said it has not received reports of serious adverse cases related to the solution.

"I'm not sure why it's up by so much today, to be honest," a sellside convertible analyst said. "I guess the market was really expecting a bad year for Bausch & Lomb, and the results were better than expected. The positive part here is that they're expecting sales to grow in '07, which suggests that they're getting back on track after last year's recall."

"But I think it would probably take another quarter or so to get a better picture in terms of whether they've addressed market concerns about their brand," the analyst added. "They've also got a bunch of lawsuits weighing on the stock, so a little bit of caution here wouldn't hurt."

The analyst said the latest recall did not appear to be significant.

"They haven't gotten any reports of problem cases so far and it doesn't look like the problem is very critical," the analyst said. "They're probably being more prudent because of what happened last year, but it sounds like the problem is under control."

Barnes quiet in gray

Barnes' planned $85 million offering of 20-year convertible senior subordinated notes was quiet in the gray market on Tuesday ahead of pricing after the market closed.

The notes, which were offered at par, were talked at a coupon of 3.125% to 3.625% and an initial conversion premium of 32.5% to 37.5%. Barnes stock (NYSE: B) closed at $21.09, up by 0.67% or 14 cents.

There is an over-allotment option for a further $15 million.

Banc of America is the bookrunner for the Rule 144A offering.

Barnes, a Bristol, Conn.-based maker of aerospace and industrial products, said it will use the proceeds of the deal to repay an outstanding revolving debt.

"They look interesting," a sellside convertible trader said. "It's a small deal, so it shouldn't be a problem getting this done."

The trader said it was difficult to compare the new paper with Barnes' older 3.75% convertible due 2025.

"The older ones mature earlier, they got better call protection and the coupon's higher," the trader said. "But they're trading around 118 right now, so they're not that cheap anymore."

The Barnes 3.75% convertible traded at 116.125 against a stock price of $15.25 on Tuesday, lower by half a point outright.

A couple of sellside analysts had the new deal modeled fair to about 1% cheap. They were using credit spreads of around Libor plus 325 and volatility between 30% and 35%.

DexCom makes silent debut

DexCom's new 4.75% convertible senior note due 2027 was not actively traded on Tuesday after it priced before the market opened.

The $40 million deal priced with an initial conversion premium of 20% and was widely believed to have been placed with a small group of investors.

The notes were offered at par. DexCom stock (Nasdaq: DXCM) rose 7.23% or 47 cents to close at $6.97 on Tuesday.

There is an over-allotment option for a further $20 million.

Piper Jaffray was the bookrunner of the Rule 144A offering.

DexCom, a San Diego, Calif.-based maker of continuous glucose monitoring systems, said it will use the proceeds of the deal to fund general purposes.

Several market sources, both on the buy and sell sides, were not even aware of the deal until asked about it.

"It's just $40 million," said a sellside analyst who had heard about the deal just before it priced. "It's probably one of those private-private deals."

Cypress, Developers launch deals

Another two offerings were announced late Tuesday, and both are expected to price Wednesday after the close.

Cypress's $500 million of two-year convertible senior notes is talked at a coupon of 0.75% to 1.25% and an initial conversion premium of 20% to 25%.

The notes will be offered at par.

There is an over-allotment option for a further $100 million.

Credit Suisse is the bookrunner of the Rule 144A offering.

Cypress, a San Jose, Calif.-based semiconductor manufacturer, said the proceeds of the deal will be used to buy back shares of its common stock and to fund convertible note hedge and warrant transactions. Cypress stock (NYSE: CY) gained 0.14% or 2 cents to $18.09 in after-hours trading.

Developers Diversified's $400 million of five-year convertible senior notes is talked at a coupon of 2.75% to 3.25%, an initial conversion premium of 20% and reoffered at 98.5.

There is an over-allotment option for a further $60 million.

Banc of America, JP Morgan and Wachovia are the bookrunners of the Rule 144A offering.

Developers Diversified, a Beachwood, Ohio-based real estate investment trust that focuses on shopping centers, said it will buy back $75 million of its common stock using the proceeds of the deal. It will also use the proceeds to repay outstanding senior unsecured debt, fund convertible note hedge transactions and for general purposes. Developers Diversified stock (NYSE: DDR) eased 0.01% or just under a cent to settle at $63.71 in after-hours trading.

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