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Midday Commentary: Emergent BioSolutions up on hedge; Colony Financial 'still wrapped around 100'
By Rebecca Melvin
New York, Jan. 24 - Emergent BioSolutions Inc.'s newly priced 2.875% convertibles traded up early Friday on their debut in the secondary market after the Rockville, Md.-based specialty pharmaceutical company priced an upsized $215 million of the seven-year bonds are the midpoint of coupon talk and beyond the rich end of premium talk.
The new Emergent bond was seen as high as 104 in trade before the market open, according to a New York-based trader. But Emergent shares, which were higher at the open, slipped quickly, and at late morning a level on the bonds was quoted at 101.25 bid, 102 offered versus an underlying share price of $23.15. Shares were down 1.7%.
That level was improved on a dollar-neutral, or hedged, basis by 2.125 points, assuming a delta of 70%, traders agreed.
Colony Financial Inc.'s 3.875% convertibles due 2021, which debuted in the market on Thursday, were little changed on little volume. "They are still wrapped around 100," a New York-based trader said.
Those bonds traded in line on a hedged basis on their debut after the Santa Monica, Calif.-based real estate investment trust priced $200 million of the new bonds in an overnight deal at the midpoint of talk.
Colony's older 5% convertibles due 2023, which priced last April, were steady at 105.5 to 106 early Friday.
U.S. equities followed global markets lower in the early going with emerging markets being hit particularly hard amid concerns about China's potentially slowing economy and the withdrawal of central bank stimulus programs in the United States and around the world.
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