Planned Invacare deal looks cheap; Priceline 0.9% convertibles contract with higher shares

By Rebecca Melvin

New York, Feb. 17 – Invacare Corp.’s planned $130 million issue of convertible senior notes looks cheap in terms of valuation, two market sources said Wednesday, but the underlying shares were crushed in the equity market and the paper was offered in the gray market ahead of final terms being set with no bid.

Using a credit spread of 900 basis points over Libor and a 40% vol., the Invacare deal looked to have a fair value of 106 at the midpoint of price talk, a New York-based trader said.

A second trader said, “It’s going to be contentious pricing,” for the bonds, in light of a 24% plunge in the underlying shares.

Back in established issues, but also in the health care space, the Medicines Co.’s 2.5% convertibles moved up in line with the underlying shares, which saw a 10% jump, but were flat on a swap basis.

Meanwhile, Priceline Group Inc.’s convertibles were trading actively, with the Priceline 0.9% changing hands up almost 3 points on an outright basis at 100.25, but contracting on a dollar-neutral, or hedged, basis by about 0.75 point, a New York-based trader said.

Priceline shares were up about 11% at $1,229.84 at late morning after the Norwalk, Conn.-based travel site reported better-than-expected fourth-quarter earnings and guided current earnings in a range that was below and just touching the consensus estimate.

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