Morning Commentary: Planned Black Hills mandatory looks 2% cheap; Clovis Oncology slide continues

By Rebecca Melvin

New York, Nov. 17 – Black Hills Corp.’s planned $260 million mandatory convertible, which was slated to price after the market close on Tuesday with a $240 million offering of common stock, looked to be about 2% cheap at the midpoint of talk, a Connecticut-based sellsider said.

The $50 par units were talked at a 7.5% yield and a 20% initial conversion premium at the midpoint.

Shares of the Rapid City, S.D.-based energy company fell $3.90, or 9%, on the heels of the deal launch to $40.77 early Tuesday.

Back in established issues, Clovis Oncology Inc.’s convertibles extended losses after plunging by about 100 points on Monday. The Boulder, Colo.-based biotechnology company had announced that regulators have asked for more clinical data on its rociletinib lung cancer treatment.

The Clovis 2.5% convertibles due 2021 fell to about 78 early Tuesday, which was down from 80 or 81 on Monday and down from 180 on Friday.

Clovis shares were down another $3.41, or 11% to $26.83, after crashing 70% on Monday.

The bonds were seen to have contracted by 0.625 point to a point on Tuesday, market sources said.

On Monday, the 100-point or so drop was marked as a 1- to 2-point expansion given the stock move.

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