Teva trades after disappointing outlook; Volcano's planned $350 million convertible on tap

By Rebecca Melvin

New York, Dec. 3 - The convertible bond market was stuck in neutral on Monday as market players paused on the first trading day of the last month of the year.

"I think guys are still working on their pricing, and where they want to get on their pricing," a New York-based trader said. "It was a really quiet, boring day."

"It was slow," a second trader said.

Teva Pharmaceutical Industries Ltd. was a name in trade that isn't a usual suspect. Its 0.25% convertibles due 2026 traded slightly lower during the session as its stock bounced around and ended up 0.5%.

The Petach Tikva, Israel-based generic drug maker lowered guidance for 2013 sales and profit and said it will discontinue some research and development programs and cut costs by $1.5 billion to $2 billion, affecting all areas of its business.

Another name seen to have changed hands was BGC Partners Inc. The New York-based wholesale financial brokerage saw its 4.5% convertibles due 2016 trade at 90.5, according to Trace data.

Elsewhere, even the usual suspects like Amgen Inc. saw muted activity. Amgen's 0.375% convertibles due 2013 traded up less than 0.125 point to 115.25, but in volume that was about half the norm. Gilead Sciences Inc., which is normally active, was quiet.

Advanced Micro Devices Inc.'s 6% convertibles due in 2015 were quiet at about 93 bid, 93.50 offered despite another surge in the underlying shares of the Sunnyvale, Calif.-based semiconductor company. Those shares have pushed up about 25% in the past four trading sessions.

There were no noticeable trends, a New York-based trader said when asked if there were more sellers than buyers on Monday.

After the market close, Volcano Corp. launched an offering of $350 million of five-year convertible senior notes that were talked to yield 1.75% to 2.25% with an initial conversion premium of 22.5% to 27.5% and were seen pricing after the market close Tuesday, according to a syndicate source.

In economic news, manufacturing contracted in November according to the Institute for Supply Management, dropping to its lowest level in more than three years. Stocks were mostly higher but sold off into the close for a slightly lower close for all three major indices.

Teva in trade

Teva's 0.25% convertibles due 2026 traded down 0.125 point to 105.282 in trade Monday, according to Trace data.

Teva shares were volatile but ended higher by 20 cents, or 0.5%, to $40.55.

The bonds trade on a delta of about 35% to 40%, a trader said.

"Some guys have a positive opinion on the stock, and some have a negative view," the trader said.

Teva shares finished up on the day. The company put out lower guidance on Friday and said a presentation is planned for Dec. 11 for the company to unveil its future direction.

The drug maker provided detailed guidance, stated what its key top line drivers are and announced its cost-cutting initiative.

Volcano offering on tap

Volcano, the Rancho Cordova, Calif.-based developer, maker and seller intravascular ultrasound and functional measurement products for vascular and structural heart disease, planned to price $350 million of five-year convertible senior notes after the market close Tuesday.

The registered, off-the-shelf deal is being sold via joint bookrunners J.P. Morgan Securities LLC and Goldman Sachs & Co.

The deal was talked to yield 1.75% to 2.25% with an initial conversion premium of 22.5% to 27.5%.

There is a greenshoe of $52.5 million.

Concurrently with the deal, Volcano plans to enter into convertible bond hedge and warrant transactions. A portion of the proceeds will be used to pay the cost of the hedge transactions.

Up to $50 million of the proceeds will be used to repurchase its 2.875% convertible senior notes due 2015. Volcano may also use a portion of the proceeds to invest in or acquire complementary products, businesses or technologies. Remaining proceeds are intended for working capital and general corporate purposes.

The notes will not be convertible before Aug. 7, 2017 except in certain circumstances.

The notes will be non-callable for life with no puts.

Volcano has an existing 2.875% convertible due 2015 that it priced in September 2010.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Amgen Inc. Nasdaq: AMGN

BGC Partners Inc. Nasdaq: BGCP

Teva Pharmaceutical Industries Ltd. NYSE: TEVA

Volcano Corp. Nasdaq: VOLC

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