Intel eyed as volume name; Ingersoll-Rand, Actuant strong; Human Genome gains more; Medarex over par

By Rebecca Melvin

New York, July 24 - Earnings reports continued to drive trading in the convertibles market on Friday, but activity tapered off from what had been an usually brisk level of dealings for the week overall.

"It was boring, but still strong," a New York-based sellsider said of Friday's session, attributing the week's atypical busy-ness to the $1.75 billion of 30-year convertibles issued by Intel Corp. late Tuesday.

"It was the first big-sized issue, and it helps add some excitement," the sellsider said.

Between the new and old Intel convertible issues, there is now $3 billion of Intel paper in the market, and "it should be a top volume name every day," the sellsider said.

But in fact, there wasn't much of the new Intel paper trading Friday, and there was only some of the older issue in play. But "it's a Friday in July and a lot of guys are out," the sellsider said.

Elsewhere, industrials such as Ingersoll-Rand Co. Ltd. and Actuant Corp. were trading stronger.

Also continuing in trade - as they have been all week - were the two 2.25% convertibles bonds of Human Genome Sciences Inc. - and they continued higher.

Medarex Inc. convertibles remained in play also, at well above par, after news late Wednesday that Bristol-Myers Squibb Co. has agreed to acquire the Princeton, N.J., biotechnology firm for $2.4 billion.

Intel steady to firmer

Intel's newly priced Intel 3.25% convertible due 2039 traded at 101.5 versus a share price of $19.50 on Friday, compared with trades at 101.25, versus share prices of $19.05 and $19.14, on its debut Wednesday.

On Thursday, there was a market at 102.125 bid, 102.375 offered, versus a share price of $19.45, according to a sellsider.

The older Intel 2.95% convertibles due 2035 were last 87 on Friday, which was off its lows of 86.5.

Shares of the Santa Clara, Calif., chip giant were lower by 12 cents, or 0.6%, at $19.36.

On Friday, Intel's older issue was the number five name in terms of volume.

"People are either saying this is an entry point or it's time to get out. Maybe out of the old and into the new," a sellsider said

Overall the market was a little more active than usual having to do with the large Intel deal, the sellsider said.

In addition the fact that equities are a lot higher has helped the convertibles market, and should encourage additional issuers to make large size offerings since selling convertibles when the underlying stock is higher is appealing from the issuer point of view, the sellsider said.

Intel priced an upsized $1.75 billion of 30-year convertibles at the midpoint of talk, via Credit Suisse and JP Morgan as joint bookrunners, late Tuesday.

The new paper initially expanded by about 0.4 point upon release to the secondary market.

Ingersoll-Rand, Actuant strong

Ingersoll-Rand's 4.5% senior exchangeable notes due 2012 traded Friday at 166 versus a share price of $27.50. Shares of the diversified industrial firm incorporated in Bermuda gained $3.40, or 14%, to $27.48.

Ingersoll-Rand posted lower second-quarter profit; but excluding non-recurring items, the result was better than expected and it raised its outlook for the rest of the year.

It earned $122.1 million, or 38 cents a share, compared to $256.1 million, or 88 cents a share, in the year-ago period due to lower sale volumes.

For the full year, Ingersoll-Rand adjusted its forecast for earnings from continuing operations to the range of $1.50 to $1.80 a share, excluding costs. The prior outlook was for $1.40 to $1.90 a share.

Meanwhile, Actuant's 2% convertibles due 2023 traded at 95.5 versus $12.25, which was up from 93 .3125 bid, 93.4375 offered versus a stock price of $11 on July 11, and up from 93.5 versus a common stock price of $12.50 a month ago on June 23.

Shares of the Butler, Wis.-based maker of industrial products and systems slipped 25 cents, or 2%, to $12.20, on Friday.

A large trade of the Actuant 2% bonds occurred Friday, which was unusual because it doesn't trade very often and when it does, only in small lots, according to a sellsider.

"A big print went up," the sellsider said, noting that the paper has expanded nicely, but so has everything else.

Medarex trades above par

Medarex's 2.25% convertible notes due 2011 traded Friday in the 115 to 116 range, according to a sellsider, which was flat compared with Thursday, when the paper jumped more than 20 points outright.

Shares of the biotechnology company ended essentially flat as well, up a penny, at $15.90.

The Medarex bonds were trading well above par because the bonds' conversion value is greater than par, according to a New York-based sellside analyst.

"You can convert these at 72.91 shares per bond you own. They are deeply in the money and since the equity is above $13.80, the bonds are above par," the sellsider said.

The $16-per-share deal for Medarex is a potential pot of gold for Bristol-Myers. The pharmaceutical giant said that among gains Medarex brings are its UltiMab Human Antibody Development System, which produces human antibodies for use in a range of therapeutic areas including immunology and oncology.

It also gains Medarex's next generation antibody-drug conjugate technology, which has potential applications in oncology; the rights to nearly a dozen antibodies in clinical trials, and full ownership and rights to ipilimumab, which if approved could contribute to future growth in the area of immunotherapy and is being studied for treatment of matastic melanoma, lung cancer and prostate cancer.

Mentioned in this article:

Actuant Corp. NYSE: ATU

Human Genome Sciences Inc. Nasdaq: HGSI

Ingersoll-Rand Co. Ltd. NYSE: IR

Intel Corp. Nasdaq: INTC

Medarex Inc. Nasdaq: MEDX

© 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.