New deals from DexCom, Kaman active post-pricing; Dermira adds to calendar; Becton on tap

By Stephanie N. Rotondo

Seattle, May 9 – The convertible bond market was focused on two newly priced deals on Tuesday.

Both issues – a $350 million offering of 0.75% convertible notes due 2022 from DexCom Inc. and a $175 million sale of 3.25% convertible notes due 2024 from Kaman Corp. – priced late Monday.

“When these new issues come, that’s all that happens,” one New York-based trader said.

The DexCom paper was making up a bulk of the trading volume, according to the trader.

He pegged the convertibles in a 100.5 to 100.875 context.

The company’s stock was off $1.41, or 1.92%, at $71.99.

J.P. Morgan Securities LLC and BofA Merrill Lynch led the Rule 144A deal, which came with an initial conversion premium of 35%.

The notes are contingently convertible prior to Feb. 15, 2022 but can be converted at any time after that date. The company can redeem the issue on or after May 15, 2020 if the stock hits a 140% price hurdle.

Conversions will be settled in cash, stock or a combination. The conversion price is $99.09, representing a conversion rate of 10.0918 shares.

A portion of the proceeds will be used to repay $75 million of borrowing under an existing credit facility. Remaining funds will be used for general corporate purposes and capital expenditures, including working capital needs and build-out of a manufacturing facility in Arizona.

Proceeds may also be used to fund business expansion, though there are no plans for this.

As for Kaman, they finished the day just under par at 99.875, according to a trader.

At mid-morning, the convertibles were seen at 100.25.

The trader opined that the slide under the par threshold was due to the fact that the underlying shares dropped over 4% on the day.

The trader also noted that Kaman is using some of the proceeds from the offering to repurchase over $103 million of its 3.25% convertible notes coming due Nov. 15, 2017. The take-out was “why the stock was up yesterday and why it backed off today,” he speculated.

BofA Merrill Lynch, JPMorgan and UBS Securities LLC ran that Rule 144A deal.

Kaman priced with an initial conversion premium of 25%.

Conversions will be settled in cash, common stock or a combination, at the company’s option. The conversion price is $65.26 per share, or 15.3227 shares per each $1,000 of notes.

The issue is non-callable for life. The paper is contingently convertible prior to Nov. 1, 2023, should the stock hit a 130% price hurdle. After that date, the notes can be converted at any time.

Holders can put the issue in the event of a change of control.

Dermira, Becton on tap

The new issue calendar continued to build up on Tuesday, as Dermira Inc. announced its intent to sell $250 million of convertible senior notes due 2022 via a Rule 144A offering.

Price talk is for a yield of 2.75% to 3.25% with an initial conversion premium of 25% to 30%.

Pricing is expected after Wednesday’s close.

Leerink Partners and Cowen & Co. are the joint bookrunners.

Proceeds will be used for working capital, capital expenditures and other general corporate purposes. The Menlo Park, Calif.-based skin condition drug developer may also use some of the funds to expand its business by in-licensing or acquiring product candidates, technologies, compounds, other assets, commercial products or complementary businesses, though there are no current plans to do so.

Dermira announced the new issue late Tuesday, coming nearly 24 hours after the company reported its first-quarter results.

The company posted a net loss of $29.5 million, or 79 cents per share. Revenue was $1.1 million.

For the year, Dermira is forecasting revenue of $4.3 million.

At Tuesday’s close, Dermira’s shares were up 42 cents, or 1.32%, at $32.16.

But Dermira isn’t the only deal slated for Wednesday business: Becton, Dickinson & Co.’s previously announced $2.25 billion offering of mandatory convertible preferreds is also expected to price during the midweek session.

Ahead of pricing, the company’s stock was off $1.96, or 1.07%, at $180.66.

The company also said it planned to sell $2.25 billion of common stock.

Price talk on the convertible preferreds is for a yield of 6% to 6.5% with an initial conversion premium of 17.5% to 22.5%.

Citigroup Global Markets Inc., JPMorgan, Morgan Stanley & Co. LLC, MUFG, BNP Paribas Securities Corp., Barclays and Wells Fargo Securities LLC are the bookrunners.

The $50-par preferreds are mandatorily convertible on May 1, 2020.

The new convertible preferreds will be listed on the New York Stock Exchange under the ticker “BDXA.”

Proceeds from both deals will be used to finance a portion of the cash consideration payable in connection with the company’s previously announced acquisition of C.R. Bard Inc. and to pay related fees and expenses. Neither deal, nor the acquisition, is contingent upon each other.

Becton, Dickinson is a Franklin Lakes, N.J.-based medical technology company.

Mentioned in this article:

Becton, Dickinson & Co. NYSE: BDX

Dermira Inc. Nasdaq: DERM

DexCom Inc. Nasdaq: DXCM

Kaman Corp. NYSE: KANM

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