II-VI plans new Rule 144A deal; Jazz edges above issue price; Red Hat busy; Teva assets eyed

By Stephanie N. Rotondo

Seattle, Aug. 22 – Convertible bond traders were again lamenting a lack of liquidity in Tuesday trading.

“This week is going to get worse and worse and next week will be another convertible eclipse,” said one trader.

Though the second half of August tends to be on the slower side, the muted volume came after about two weeks of pretty steady new issuance, as well as earnings news that helped to push names around.

While there were no new issues priced during the session, II-VI Co. did announce a deal after the close.

The company said it was selling $300 million of five-year convertible senior notes via a Rule 144A offering. The company plans to use the funds for privately negotiated stock repurchases associated with the offering, as well as for general corporate purposes.

Price talk is for a 0.25% to 0.75% yield and an initial conversion premium of 30% to 35%, a market source reported.

BofA Merrill Lynch is the bookrunner.

As for Tuesday’s dealings, Jazz Pharmaceuticals plc’s $500 million of 1.5% convertible notes due 2024 were edging up toward 98, according to a trader.

At mid-morning, the convertibles were deemed 0.5 point higher at 97.5. Later in the day, the issue was seen at 97.90.

The company’s stock was also trending up, adding $4.12, or 2.89%, to $146.74.

The Rule 144A deal priced on Friday with an initial conversion premium of 50%. The issue came discounted at 97.

Morgan Stanley & Co. LLC was the active bookrunner.

Meanwhile, Red Hat Inc.’s 0.25% convertible notes due 2019 were moving up, with one trader seeing the paper trading with a 147 handle.

Earlier in the day, the convertibles were trading around 145.

Red Hat stock was also better, adding $2.24, or 2.18%, to close at $104.89.

There was no fresh news out on Red Hat to act as a catalyst.

There was, however, fresh news out on Teva Pharmaceutical Industries Ltd. Bloomberg reported Tuesday that the Israeli company’s women’s health unit was attracting interest as the company looks to shed assets.

But the news wasn’t doing all that much to move Teva’s 0.25% convertible notes due 2026.

Teva unit eyed

A trader said Teva Pharmaceutical’s 0.25% convertible notes were only a shade higher on news the company’s women’s health unit was attracting interest.

The trader saw the bonds trading with a 90 handle.

As for the company’s stock, it was off 3 cents at $17.01.

Church & Dwight Co. and Cooper Cos. are among those that have expressed interest in Teva’s asset. Apollo Global Management LLC is another potential bidder.

Teva has been considering selling the unit, either as a whole or by splitting up the European and U.S. divisions.

For its part, Church & Dwight is said to only be interested in the U.S. portion.

The deadline for final bids could come as early as this week, Bloomberg reported.

Mentioned in this article:

II-VI Co. Nasdaq: IIVI

Jazz Pharmaceuticals plc Nasdaq: JAZZ

Red Hat Inc. NYSE: RHT

Teva Pharmaceutical Industries Ltd. NYSE: TEVA

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