Midday Commentary: New Navistar trades flat at discounted offer price; BioMarin in focus

By Rebecca Melvin

New York, Oct. 8 - Navistar International Corp.'s newly priced 4.5% convertibles traded little changed in the early going Tuesday after $200 million of the five-year convertible bonds priced at a discount to par of 99.5 and at the cheap end of talked terms.

The new Navistar 4.5% convertibles due 2018 were seen at 99 bid, 99.5 offered versus an opening share price of $36.50 for the Lisle, Ill.-based truck, bus, military vehicle and engine maker.

Navistar's existing 3% convertibles due 2014 were also little changed at 103ish versus a share price of $36.50, according to a New York-based trader.

The convertibles market, which was bustling with four new deals in play, seemed focused primarily on the new BioMarin Pharmaceutical Inc. dual-tranche deal for $600 million, which was seen pricing after the market close.

The BioMarin deal looked cheap on a valuation basis, but one trader said valuation "doesn't matter - technical demand will outstrip fundamentals."

Nevertheless, the trader put a credit spread of 250 basis points over Libor and a 35% vol. on the BioMarin five-year A tranche, making it 3 points cheap at the midpoint of 0.75% to 1.25% coupon talk and 32.5% to 37.5% initial conversion premium talk.

At 250 bps over Libor and 32.5% vol., the seven-year B tranche was 1.75 points cheap at the midpoint of 1.5% to 2% coupon talk and 32.5% to 37.5% premium talk, the trader said.

But on the B tranche, the trader could also see a spread of 300 bps and 30% vol., which would make the paper just 0.5 point cheap.

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