Invacare sets talk, timing; Conceptus, ArvinMeritor launch deals; Manor Care gains on buy interest

By Kenneth Lim

Boston, Feb. 5 - Invacare Corp. set price talk on its planned $125 million offering of 20-year senior subordinated convertible notes, which are expected to price Tuesday after the market closes. The deal was quiet in the gray market, as analysts described the deal as fair but possibly less exciting than a concurrent straight-debt offering.

Meanwhile, Conceptus Inc. launched $75 million of 20-year convertibles, which are also expected to price Tuesday after the market closes. And ArvinMeritor Inc. announced plans for $175 million of 20-year convertibles but did not disclose the price talk and timing of the deal.

The convertible market in general was typically languid on Monday amid a lack of direction in the stock markets as equities ended mixed.

"It was kind of quiet today," a sellsider said.

Manor Care Inc.'s 2% convertible due 2036 rose about an eighth of a point outright as buyers continue to be attracted to the name.

The convertible traded at 115.5 against a stock price of $53.20 on Monday, while Manor Care stock (NYSE: HCR) rose 0.19%, or 10 cents, to close at $53.32.

"We continue to see some buy interest in Manor Care," the sellsider said. "Those were better last week and we saw better buyers today."

Manor Care is a Toledo, Ohio-based provider of health care services.

Invacare quiet with talk set

Invacare's planned $125 million offering of 20-year senior subordinated convertible notes was quiet in the gray market on Monday as analysts described the deal as fair but relatively less attractive than its concurrent straight-debt offering.

Invacare's convertible deal is talked at a coupon of 3.875% to 4.375% and an initial conversion premium of 20% to 25%. The convertibles will be offered at par. Invacare stock (NYSE: IVC) closed at $20.24 on Monday, down by 4.08% or 86 cents.

"I didn't see any Invacares in the gray market," a sellside convertible trader said. "I don't think the market's formed yet. There will probably be something tomorrow [Tuesday] afternoon."

Bank of America is the bookrunner for the offering, which will be sold under Rule 144A in the United States and under Regulation S overseas.

There will also be a concurrent offering of senior notes due 2015, which is talked at a coupon around 10%.

The convertibles will be non-callable for the first five years and may be called after that subject to a hurdle at 130% of the conversion price.

The convertibles may be put in years 10 and 15.

Invacare, an Elyria, Ohio-based maker of non-acute health care products, expects to use the proceeds of the convertible deal and other debt to refinance substantially all of its existing debt.

A sellside convertible analyst said that, at first glance, the deal appeared to pale in comparison to the straight-debt offering.

"The problem is the first put's in year 10," the analyst said. "You've got straights pricing at a coupon around 10%, and they mature in eight years. What am I supposed to do with a piece of paper that's two years longer and subordinated? That's kind of how you'll be working around this."

Considering the convertible's longer structure and subordination, the analyst thought that the deal would have to be priced cheap to garner enough interest from investors.

Another convertible strategist said the deal modeled "fair valuish" using a credit spread of more than 500 basis points over Libor. That strategist agreed that the structure of the convertible deal required a wider spread than usual.

"On the face of it, that's a relatively wide spread...but it's so long, and a 10-year put so maybe you have to be a bit conservative," the strategist said. "A five-year put here would definitely make a difference...you should be more cautious."

The strategist said there was some speculation that the deal could price before Tuesday evening, given the strong demand that led Newport Corp. to price its offering earlier than expected on Friday. In Invacare's case, however, the demand is likely to be for the straight debt rather than the convertible, the strategist said.

"There should be a fair amount of interest in the high-yield offering," the strategist said.

Conceptus launches deal

Conceptus on Monday announced a $75 million offering of 20-year convertible senior notes, talked at a coupon of 2.25% to 2.75% and an initial conversion premium of 25% to 30%.

The convertibles will be offered at par and are expected to price Tuesday after the market closes

There is an over-allotment option for a further $11.25 million.

UBS Investment Bank is the bookrunner of the registered off-the-shelf offering.

Conceptus, a Mountain View, Calif.-based maker of birth control devices, said it will use the proceeds of the deal for general purposes and to fund convertible note hedge and warrant transactions.

Conceptus stock (Nasdaq: CPTS) slipped 2.78%, or 63 cents, to $22 in after-hours trading following the announcement of the deal.

ArvinMeritor plans deal

ArvinMeritor also launched a $175 million offering of 20-year convertible senior unsecured notes and an over-allotment option for a further $25 million.

Price talk and the bookrunners were not disclosed for the private deal.

ArvinMeritor, a Troy, Mich.-based maker of auto components and modules, said it will use the proceeds of the deal to fully repay a $169.5 million term loan due 2012. If it decides not to repay that loan, it will use the proceeds for general purposes, including retiring other debt or funding certain pension or other long-term liabilities.

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