Molycorp, Brookdale up; Boston Properties adds outright, slips on hedge; NuVasive on tap

By Rebecca Melvin

New York, June 21 - Prices in the convertible bond market followed equities higher Tuesday, but there wasn't a lot of volume in trade.

"Everything is stronger, but everything's on small volume," a New York-based sellside trader said.

"We'll see if we get any follow through tomorrow. But hopefully it means that we've found some kind of an end to the correction," the trader said.

The rising tide of equities lifted two recent new convertible issues. They included Molycorp Inc.'s 3.25% convertibles, which priced June 9, moved up to 109 versus a share price of $53.05, which is the highest level to which the stock has risen since the convert priced. Brookdale Senior Living Inc. Co., which priced a day earlier than Molycorp, was an active trader Tuesday, moving up to 102, or nearly 2 points outright, on the day.

Boston Properties LP saw its 3.75% exchangeable senior notes due 2036 active in trade and higher outright, but the paper contracted about 0.375 point on swap, according to a New York-based sellside trader. The real estate investment trust was upgraded to "outperform" from "sector perform" by RBC Capital Markets LLC.

Life Technologies Corp., a life science company created by the combination of Invitrogen Corp. and Applied Biosystems Inc., was trading Tuesday, with its 1.5% convertibles due 2024 seeing most of the action and edging higher. The issue printed at 115.679, up 0.6 point early in the session, and later at 116.065, up a point.

Clearwire Corp.'s convertibles looked to have stemmed its losses, with the 8.25% convertibles of the Kirkland, Wash.-based mobile broadband network operator changing hands at 87.75 versus a share price of $3.75.

Horizon Lines Inc. was quiet in trade but seen at about 83.5, while Horizon's shares climbed. The Charlotte, N.C.-based shipping company has gotten another extension to June 24 for holders of a majority of its unsecured 4.25% convertible senior notes due 2012 by which the company is to receive subscription commitments for $350 million in total principal amount of 9% senior secured notes to be issued and sold to the exchanging holders.

In the new issue arena, NuVasive Inc., a medical device maker focused on developing surgical products and procedures for the spine, launched a $325 million offering of six-year convertibles, talked at a coupon of 2.5% to 3% and an initial conversion premium of 27.5% to 32.5%.

Equity markets were cheered ahead of results of a confidence vote in Greece for prime minister George Papandreou. It was positive in that it appears Greece has averted a debt default at least for now and that the vote points toward agreement that progress must be made toward austerity.

The Dow Jones Industrial Average ended up 109.63 points, or 0.9%, to 12.190.01; the S&P 500 index added 17 points, or 1.3% to 1,295.52; and the Nasdaq Stock Market popped 57.60 points, or 2.2%, to 2,687.26.

Boston Properties slips

Boston Properties' 3.75% exchangeables due 2036 traded at 118 during the session and were seen in the context of 118 to 118.25 during the session, compared to trades at 116.5 on Friday.

Shares of Boston Properties rose $1.05, or 1%, to $106.73 in average volume.

"On swap they were in about 0.375 point," a New York-based sellside trader said.

The Boston-based office REIT was upgraded to "outperform" from "sector perform" Tuesday by RBC Capital Markets analyst David Rodgers, who said in a research note that the company is well positioned to drive double digit earnings growth in 2012.

RBC's price target on the shares was raised to $121 from $113.

"We expect that exposure to NYC, Boston, San Francisco, and Metro D.C. will remain important for investors during 2H11 as more robust transaction activity and greater global attraction should better support pricing for existing assets and drive demand for development," Rodgers and associate Michael Carroll wrote in the note.

"In addition to reducing the investment risk profile, [Boston Properties'] strong balance sheet and enhanced liquidity should support opportunistic acquisitions and pursuit of development," Rodgers and Carroll wrote.

The 3.75% convertibles traded rich to the Boston Properties 3.625% convertibles.

Other REITs seemed unchanged, the trader said.

NuVasive on tap

NuVasive plans to price $325 million of six-year convertible bonds via Bank of America Merrill Lynch and Goldman Sachs & Co. in a registered deal after the market close Wednesday.

NuVasive has existing 2.25% convertibles that were priced in 2008, and the majority of the proceeds of this deal will be used to repurchase that paper, which is due in 2013.

Upon hearing about the deal's launch, one sellsider said it explains "why the borrow disappeared this morning."

The sellsider said that shares, which had been easy to purchase prior to today, were difficult to borrow early in the session. But he wasn't sure whether borrow was difficult for players across the board, or not.

The NuVasive deal has a 15%, or $48.75 million, greenshoe.

The notes are non-callable with no puts.

NuVasive, a San Diego-based medical device maker, intends to use proceeds for general corporate purposes and to repurchase $230 million of its existing 2.25% convertible senior notes due 2013. The company may also consider possible strategic acquisitions or investments.

The company also plans to enter into convertible note hedge and warrant transactions intended to increase the effective conversion price of the notes and thereby reduce stock dilution upon potential future conversion of the notes.

There is contingent conversion at a price trigger of 130%.

The conversion settlement will be cash settled until stockholders approve an increase of authorized shares, then settlement will be in cash, stock or a combination.

There is full dividend protection and change-of-control protection.

The company also intends to enter into separate convertible note hedge and warrant transactions with counterparties of initial purchasers of the senior notes.

Mentioned in this article:

Boston Properties LP NYSE: BXP

Brookdale Senior Living Inc. Co. NYSE: BKD

Clearwire Corp. Nasdaq: CLWR

Horizon Lines Inc. NYSE: HRZ

Life Technologies Corp. Nasdaq: LIFE

Molycorp Inc. NYSE: MCP

Nuvasive Inc. Nasdaq: NUVA

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