Amkor up on revised offer; Nabi gains on sale hopes; ImClone rides stock rally; Brandywine quiet in gray

By Kenneth Lim

Boston, Sept. 28 - The convertible bond market had another active session on Thursday, with event-related news spurring equity volatility.

Amkor Technology Inc. rebounded slightly after the company sweetened an earlier consent solicitation offer, although its earliest-dated 5% convertible due 2007 stayed shy of levels from earlier in the week.

Nabi Biopharmaceuticals gained almost 4 points outright on optimism after the company hired Banc of America Securities LLC to review its strategic options.

ImClone Systems Inc. saw a modest improvement early in the day as the stock rallied after a major shareholder renewed pressure on the board.

Brandywine Realty Trust's planned $300 million offering of 20-year exchangeables was quiet in the gray market as investors panned the deal as just fairly priced.

Volatility plays in general did better on Thursday, a buyside convertible bond trader said.

"Some of the high-delta type names are active today," the buysider said. "Looks like a lot of the guys want to get involved in these. All the volatility names are all better to buy."

Amkor rises on sweetener

Amkor's 5% convertible due March 2007 regained about 1.5 points outright to trade at 94 against a stock price of $5.04 on Thursday after the company offered bondholders more money in a revised consent solicitation, but the note remained shy of its 96-point level from two days ago.

The semiconductor testing and assembly company's 2.5% convertible due 2011, however, bounced back by a point to Tuesday's level, changing hands at 83 against the same stock price.

"They gained on the revised offer," a sellsider said.

Amkor stock (Nasdaq: AMKR) closed at $5.49, up by 7.44% or 38 cents.

Chandler, Ariz.-based Amkor, which is seeking waivers from its bondholders after being late in filing its financial reports, on Thursday offered an additional $10.1 million in consent fees to holders of $1.52 billion of notes, including the two convertible series.

Holders of the 5% convertible could share $569,688, or about $356,055 more than the previous offer, in additional consent fees if they give consents and Amkor has yet to file its required financial reports by the time the consents come into effect. They will also be paid $142,422 in an initial consent fee and another $356,055 extension fee if Amkor is still late by the end of 2006.

The additional consent fee was raised by $1.425 million for the 2.5% convertible, to $1.71 million. There is also an initial consent fee of $190,000 and an extension fee of $475,000 for holders of the 2.5% convertible.

A sellside convertible bond trader said the new offer was clearly better for investors, but it was not a big surprise.

"Of course it's better," the trader said. "There was no way the company could have paid off all the debt if everyone wanted to accelerate the bonds, and they had to come up with something if the earlier offer wasn't enough. If they can make a deal with the bondholders, it's good for everybody."

But the trader said it remains to be seen if the new offer will be enough.

"Amkor isn't in a very good position right now," the trader said. "The bondholders know the company will have to pay up, and the company probably knows that too."

Nabi rallies to new hope

Nabi's 2.875% convertible due 2025 improved about 3.5 points on Thursday after the company hired Banc of America as an adviser to review strategic options, sparking hopes of a sale.

The convertible was marked at 90 against a stock price of $6.05 on Thursday. Nabi stock (Nasdaq: NABI) climbed 6.79%, or 38 cents, to close at $5.98.

"That's kind of a big move," a sellside convertible strategist said.

Boca Raton, Fla.-based Nabi said late Wednesday that it had hired Banc of America to assess its options, including licensing deals, joint ventures, mergers, recapitalization or a sale. The move came after the hedge fund Third Point, which holds about 9.5% of Nabi common stock, said it will seek the removal of Nabi chairman and chief executive Thomas McClain. Third Point's fund manager, Daniel Loeb, criticized the drug company's cash spending and slow drug approval success.

"We know they've been under pressure from the investor for months," a convertible bond analyst said. "Third Point says, 'We're going to seek the dismissal of the CEO,' and Nabi says, 'Hey, we're doing a good job here.'"

The analyst said there was a possibility that convertible bond holders could get par if there was a takeover, but it is still too early to know how the story will play out. Wednesday's hiring of Banc of America is just the latest in "an ongoing saga," the analyst said.

The convertible bond strategist was skeptical about whether the hiring was significant.

"I don't think there's anything that different in the company," the strategist said. "It's a little frothy, up about a point or two, but it would seem that for a company in Nabi's situation, contracting an investment bank to help isn't that big a move."

ImClone gets Icahn boost

ImClone's 1.375% convertible due 2024 made a modest gain with the stock early Thursday as shareholder Carl Icahn sought to remove half of the company's board of directors, but the convertible fell back later in the day as the stock corrected.

The convertible traded at 88.375 against a stock price of $29.25 early Thursday. ImClone stock (Nasdaq: IMCL) closed at $28.51, a drop of 0.83% or 24 cents.

"There was a small rally earlier today [Thursday], but it looks like guys took a quick profit," a sellside convertible bond trader said.

Icahn on Thursday sought shareholders' consents to remove six of ImClone's 12 board members, and to appoint his appointee, pediatric surgeon Peter S. Liebert. Icahn is already on the board with three other new members.

Icahn's move came just after the Food and Drug Administration approved Amgen Inc.'s colon cancer drug Vectibix, which is seen as a competitor to ImClone's only drug, Erbitux.

A convertible bond analyst said the Vectibix approval likely had a muted impact on ImClone because it was largely expected.

"It was so expected that even Amgen's stock is down today," the analyst said.

Brandywine deal quiet in gray

Brandywine's planned $300 million of 20-year exchangeable unsubordinated notes saw no action in the gray market on Thursday as investors described the deal as aggressive despite a reoffer price of 99.

"The stock yield is about 1.5 times the convertible...it's probably more hedge than anything because the common has such a high yield," a buyside convertible bond trader said.

The deal was talked at a coupon of 3.625% to 3.875% with an initial exchange premium of 20%. Pricing was expected after the market closed.

The notes will be issued by Brandywine subsidiary Brandywine Operating Partnership LP and exchangeable into common stock of the listed company. Brandywine Realty is guaranteeing the notes.

There is an over-allotment option for a further $45 million.

Merrill Lynch, Bear Stearns and Lehman Brothers are the bookrunners of the Rule 144A offering.

Brandywine, a Radnor, Pa.-based real estate investment trust that focuses on office and industrial properties, plans to use the proceeds to concurrently buy back $60 million of its common stock and to partially repay an existing revolving loan. It will also invest in government or short-term securities pending the redemption of its $300 million floating-rate guaranteed notes due 2009, which were issued in March 2006.

The buysider said there was no concern about the stock borrow for the deal, but it seemed only fair at the reoffered price, and the gray market was silent on the name. Part of the problem for the deal was that it is coming out of a sector that has been issuing a lot of paper recently, the buysider said.

"People are just so sick of the REITs; that's all there is," the buysider quipped.

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