Vishay Intertechnology moves up on debut; older PDL BioPharma unmoved with new deal ahead

By Rebecca Melvin

New York, May 10 - Vishay Intertechnology Inc.'s newly priced 2.25% convertibles due 2041 traded up Tuesday on their debut in secondary dealings after the Malvern, Pa.-based maker of semiconductors and electronic components priced a quickly shopped $150 million deal at the middle of price talk

An older Vishay 2.25% convertible due 2040, which priced six months ago, was not heard in trade. Both deals were "happy meals," in which the company sold stock concurrently with the convertibles issue, and they were well-received by investors.

"Cheap stock, move up in cap structure, collect a coupon, and have the potential for option value. What's not to like for these investors? In the case of Novellus Systems and Vishay, both of these fit that bill," a West Coast-based sellsider said, referring to another new issue priced last week in the convertibles market.

"These types of names will get gobbled up and put away, most likely to not trade again for a while," the sellsider said.

PDL BioPharma Inc. was expected to price $135 million of four-year convertible senior notes late Tuesday, and that deal was said to be going well, although it was not heard in the gray market until late in the session when a par bid was heard. One source said there was a 101 bid, but he didn't "know how real that was."

PDL's older convertibles due 2012 were active in trade but basically unchanged. Proceeds of the new convertibles will be used to buy back the old ones.

After the market close Tuesday, PDL priced $135 million of four-year convertibles at par to yield 3.75% with an initial conversion premium of 27.5%, at the midpoint of talk.

Elsewhere, Lam Research Corp., which priced two tranches of five- and seven-year paper last week, saw a slightly wider premium to parity with the underlying shares slightly lower.

The two issues of the Fremont, Calif.-based semiconductor equipment maker were seen at 103.5 versus a share price of $48.35 for the five-year, or A paper, and at 103.25 versus the same share price for the seven-year, or B paper.

"Both are a touch wider this afternoon. The bonds closed at roughly the same levels yesterday and the stock is 30 cents lower today," a New York-based sellside desk analyst said.

Alliant Techsystems Inc.'s convertibles traded at 116 versus a share price of $75.45.

Overall, the convertible bond market seemed to have a heavier tone Tuesday, one New York-based sellsider said. But not everyone agreed. A second New York-based sellsider said it looked to him like more things were better on swap.

"I guess is depends on what names everyone was involved in," the sellsider said.

The market has been very name specific. And although there has been a little flurry of low-premium, high-delta issues, it was uncertain whether the stream of issuance would continue.

"To be honest, I don't think the things that are needed for more sustained issuance are in place yet. We need a weaker equity market and a pickup in vol., and rates have to pick up. I think it's a little soon," the sellsider said.

Vishay moves up

Vishay's newly priced 2.25% convertibles due 2041 traded at 102.5 versus a share price of $16.91 and seemed to hang right around that level all day.

"That seems to be around where they are trading. That is where we traded a bunch," a New York-based sellside trader said.

Meanwhile shares of the Malvern, Pa.-based maker of semiconductors and electronic components moved up from that swap level, gaining 82 cents, or 4.9%, on the day to $17.73 in heavy volume.

The new Vishay bonds were called 102 bid, 103 offered at the close and were deemed to have done well.

The $2.8 billion market cap company plans to repurchase shares with the proceeds.

The new issue follows Vishay's $275 million issue of 2.25% convertibles due 2040, which priced six months ago in November. It also had a low initial conversion premium of 12.5%.

That deal was also a happy meal - because the issuer bought back shares at the same time that it was issuing the convertibles - and it also was 30-year paper with a 10-year non-callable period followed by a provisional call at 150%.

"I think they did another deal because they could, because there was demand for it," a sellsider said. "It's a decent credit."

J.P. Morgan Securities LLC was the bookrunner for the new Rule 144A offering, which has an initial conversion price of $19.02.

The new deal priced in the middle of talk of 2% to 2.5% with an initial conversion premium of 10% to 15%.

Older PDL trades unchanged

PDL's existing convertible bonds due 2012 traded actively at about 101 versus a share price of $6.55 on Tuesday.

Meanwhile, an existing PDL 2.875% issue, of which there is $90 million outstanding, was quoted at 107 to 107.125 versus a share price of $6.53; but that paper was not seen in trade.

The existing PDL look relatively cheap compared to the new one. But there are structural advantages to the new one, including the lower dollar price and higher coupon.

The new PDL was talked at a coupon of 3.5% to 4% and an initial conversion price of 25% to 30%, and proceeds of the registered deal, being brought via Bank of America Merrill Lynch, were earmarked to buy back the 2% convertibles of 2012 of which there is about $135 million outstanding.

"It's a small deal. They're bidding issue," a New York-based sellside trader said.

Shares of the Incline Village, Nev.-based biopharmaceutical company slid 32 cents, or 4.9%, to $6.21 on Tuesday.

The new paper matures in four years, which is an unusual term for the convertibles market but was seen as perhaps necessary to get the deal done.

"PDL has a short-lived stream of royalties. The debt comes due close to when the revenue stream dries up, and when that happens you could find them in a much riskier situation. If you go out further [than four years], then there are questions about cash flow," a New York-based sellside trader said.

PDL engages in the management of antibody humanization patents and royalty assets, which consist of Queen et al. patents and license agreements with various biotechnology and pharmaceutical companies.

Mentioned in this article:

Alliant Techsystems Inc. NYSE: ATK

Lam Research Corp. Nasdaq: LRCX

PDL BioPharma Inc. Nasdaq: PDLI

Vishay Intertechnology Inc. NYSE: VSH

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