MGIC soars on debut; Evergreen Solar active on new issue, tender; Gilead Sciences improves

By Rebecca Melvin

New York, April 21 - MGIC Investment Corp.'s new 5% convertibles traded up to 114 on their debut Wednesday after pricing at the rich end of talk ahead of the market open. The paper gained as much as 10 points dollar neutral while the stock took it up a little higher.

"It was a big move. They obviously didn't price it that well. It was pretty cheaply priced at issue," a Connecticut-based sellside trader said.

MGIC, a mortgage insurer, priced $300 million of convertibles and about $700 million of common stock early Wednesday after launching early Tuesday.

Evergreen Solar Inc. was actively traded, with convertibles players selling the Evergreen 4% convertibles due 2013 into strength amid a concurrent tender for that paper.

The new Evergreen 13% convertibles, of which $165 million debuted Wednesday, were said to be offered below par near the close.

"I don't know if they traded down there, but they were offered," a sellsider said of the new paper of the Marlboro, Mass.-based solar panel maker.

Elsewhere, Gilead Sciences Inc. was extremely active and improved by 1.5 points to 2 points as shares of the Foster City, Calif.-based biopharmaceutical company fell after the company reported better-than-expected earnings but lowered guidance.

"Volume is jacked due to Gilead and Evergreen's 4% convertibles in trade. Otherwise it's the same old, same old," a New York-based sellside trader said.

Amgen Corp. was also active, trading little changed to slightly lower ahead of its earnings report, which was expected to be released after the market close.

AmeriCredit Corp. was also in trade ahead of its earnings also due out after the close.

MGM Mirage's 4.25% convertibles, which priced last Thursday, continued to trade solidly at the 105 mark even as its shares slipped into the red, but the shares managed to end the session in positive territory.

The MGM paper jumped to 105 on Tuesday with the stock boosted by a Goldman Sachs analyst, who said the casino operator's stock may move up 25% on momentum in Las Vegas and strength in Macau.

DryShips Inc. wasn't heard in trade after the Greece-based shipping company launched a $150 million add-on of 5% five-year convertible senior notes that were seen pricing after the market close on Wednesday. The existing DryShips 5% convertibles traded at 111.5, which was up 2 points from the previous session, according to Trace.

MGIC surges on debut

MGIC's newly priced 5% convertibles traded up to as high as 114 on their debut, with one sellsider reporting a trade early on at 112.5 versus a share price of $11.25.

Shares of the Milwaukee-based mortgage insurer closed at the $11.25 level, but intraday levels had moved higher than that.

The shares settled up 44 cents, or nearly 4% on the day.

The new paper was higher in the gray market Tuesday at 103, and actually priced ahead of schedule before the market open Wednesday, instead of after the market close. They also came at the rich end of talk for the premium and beyond the rich end of talk for the coupon.

Price talk was for a coupon of 5.25% to 5.75% and a premium of 20% to 25%.

MGIC also priced $700 million of common equity at the same time, at a share price of $10.75 each.

The new bonds will be senior to MGIC's existing 9% convertible junior subordinated debentures due 2063.

What was behind the surge of the financial paper was said to be simply cheap pricing.

It certainly didn't under-perform on a delta basis, but expanded about 10 points dollar neutral.

Proceeds from the bond and stock offerings will be used to repay the company's 5.625% senior notes due 2011 and for general corporate purposes, which may include improving liquidity by providing funds for debt service and increasing the capital of MGIC Investment Corp.'s primary insurance subsidiary, Mortgage Guaranty Insurance Corp., and other subsidiaries.

Goldman Sachs & Co. was the bookrunner of both offerings.

Evergreen Solar in focus

Evergreen's 4% convertibles due 2013 saw a print or two at 66.125, which was the company's tender offer price for the paper, but the vast majority of the notes traded up a couple of points to the 55 bid, 56 offered range. Later they were 53.5 bid, 54.5 offered.

"They were as high as 56.5 and as low as 53.5," a Connecticut-based sellside trader said.

Meanwhile, the new Evergreen 13% paper was heard to be offered below par near the close, and shares of the solar panel maker ended down 6 cents, or 4.8%, at $1.19.

Evergreen Solar issued the $165 million of 13% convertibles, and those that played in that deal were allowed to tender their Evergreen Solar 4% notes.

About half of the proceeds, or $85 million, was earmarked to buy back the 4% notes, and about half was going to add to liquidity.

"A lot of guys got shut out, and subsequently those that missed out were selling into strength," the sellsider said.

The new convertible has a high coupon of 13%, when most deals are currently priced in the 4.5% to 5.5% range, and with an initial conversion premium of 52%, well beyond the 20% to 25% range that is typical. And as one trader put it: "It speaks for itself as to the kind of shape Evergreen Solar must be in."

The notes will be convertible into shares of Evergreen Solar's common stock at an initial conversion rate of 525.2462 shares of common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $1.90 per share.

Holders have the right to require Evergreen to purchase their notes for cash on April 15, 2013.

The Rule 144A offering was sold via Piper Jaffray & Co.

Gilead improves

Gilead's 0.5% convertible senior notes due 2011, or the A paper, saw about $70 million of bonds trade on Wednesday, and they were at about 113, which was equal to 5 points over parity, compared to trading at about 3.25 points over parity last week.

About $46 million of the Gilead's 0.625% convertibles due 2013 traded during the session, a Connecticut-based sellside trader said after the close.

Shares of the biopharmaceutical company fell after better-than-expected earnings but lowered guidance and amid pressure on the overall health care sector as well. Gilead shares fell $4.31, or 10%, to $40.76.

Gilead lowered its outlook for 2010 sales by about $200 million to a range of $7.4 billion to $7.5 billion, citing the impact of recently passed health care reform.

The new legislation seeks for drug companies to offer higher price rebates for government-funded health plans.

Gilead's first-quarter net income rose to $854.9 million, or 92 cents per share, from $589.1 million, or 63 cents per share, in the year-earlier period.

Adjusted for acquisition expenses, restructuring costs and stock-based compensation, the company said it earned 99 cents a share for the quarter. Analysts had expected earnings of 96 cents a share.

Revenue rose 36% to $2.09 billion, while product sales rose 24% to $1.79 billion. Analysts had expected revenue of $2.07 billion.

After the earnings and lowered guidance, the company was downgraded by a Piper Jaffray analyst to "neutral" from "overweight."

Mentioned in this article:

AmeriCredit Corp. NYSE: ACF

Amgen Corp. Nasdaq: AMGN

DryShips Inc. Nasdaq: DRYS

Evergreen Solar Inc. Nasdaq: ESLR

Gilead Sciences Inc. Nasdaq: GILD

MGIC Investment Corp. NYSE: MTG

MGM Mirage NYSE: MGM

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