Bottomline extends gains; Dendreon adds about a point; A123 surges on auction; Molycorp up

By Rebecca Melvin

New York, Dec. 10 - Bottomline Technologies Inc.'s new convertible continued to trade actively on Monday, expanding on a dollar-neutral, or hedged, basis on top of a gain notched Friday on its debut in the secondary market, a syndicate source said.

The Portsmouth, N.H.-based business-to-business software company's $165 million convertible expanded 0.5 point on Monday as the underlying shares continued to run, the source said.

Dendreon Corp.'s convertibles were also active and better by a point or more as the underlying shares of the Seattle-based biotechnology company added 3.5%.

Meanwhile, the convertibles of bankrupt AMR Corp. extended gains for yet another session, pushing up to the 80 mark and beyond as investors continued to cheer a pilot labor pact that ends a years' long dispute with the air carrier and puts the company closer to the bankruptcy court exit door.

Also in the bankruptcy arena, A123 Systems Inc.'s convertibles surged as much as 10 points to the 62 bid, 63 offered context after an auction that left China's Wanxiang America Corp. the winner of A123 Systems assets with a $256.6 million offer for all the facilities except an Ann Arbor, Mich.-based government business.

Elsewhere, Molycorp Inc. was higher by about 2.5 points as the underlying shares of the Greenwood Village, Colo.-based rare earth minerals producer surged.

Overall, the action in the convertible bond market was company specific, with the market for the most part getting off to its typically slow start for the week. There were no major new issues, but there was a small, $25 million private deal that a subsidiary of San Jose-based Oclaro Inc. launched for six-year exchangeable senior secured second-lien notes. Oclaro is a maker of optical components for communications applications.

Investors were speculating central bank policy direction ahead of a two-day meeting of the Federal Reserve that concludes Wednesday. It isn't clear whether the central bank will raise or hold its mortgage-backed securities buying program that currently buys back $40 billion a month of mortgage-backed securities.

The Federal Open Market Committee, the Fed policy-making wing, will announce its direction along with economic forecasts on Wednesday.

Bottomline extends gains

Bottomline's 1.5% convertibles due 2017 closed up at 105 bid, 105.75 offered versus an underlying share price of $24.15.

That was on top of gains notched Friday when the paper was seen ending the day at 102.875 bid, 103.25 offered versus an underlying share price of $23.12.

Shares of the Portsmouth, N.H.-based company gained $1.05, or 4.6%, to $24.15, which reversed the 1.9%, or 45 cent, loss on Friday in very active trade.

The bond expanded 0.5 point, a syndicate source said Monday.

Buyers outpaced sellers as shares gunned higher.

It wasn't clear what was pushing shares higher.

On Friday, a market source called the new paper better by 2.5 points on a dollar-neutral basis.

Bottomline priced an upsized $165 million of five-year convertible senior notes at par after the market close Thursday to yield 1.5% with an initial conversion premium of 27.5%.

Pricing came at the midpoint of 1.25% to 1.75% coupon talk and at the cheap end of 27.5% to 32.5% premium talk.

RBC Capital Markets LLC and RBS Securities Inc. were joint bookrunners of the planned $150 million offering of five-year convertible bonds.

The registered deal has a greenshoe for up to an additional $24.75 million of notes.

The business-to-business software solutions company is focused on automating billing and invoicing functions.

Proceeds will also be used for general corporate purposes, including potential acquisitions and working capital.

Dendreon adds in trade

Dendreon's 2.875% convertibles traded up to 69.5 bid, 69.75 offered, which was better by a point or more.

Dendreon shares added 17 cents, or 3.5%, to $5.04, in heavier-than-average volume.

A convertibles trader said it was unclear why the convertibles moved higher.

There was news Monday that a competing prostate cancer drug Zytiga, made by Johnson & Johnson, had received approval to be used earlier in the disease, thereby increasing the eligible population of prostate cancer patients that can take the medication.

The Food and Drug Administration said in a statement Monday that Zytiga can be prescribed before chemotherapy in men whose prostate cancer has spread to other parts of the body and is resistant to testosterone-lowering treatments.

The approval could have implications for Dendreon's Provenge prostate cancer drug, which is approved for a similar use, and could be used with Zytiga and in sequence.

Dendreon has struggled to launch its Provenge prostate drug therapy and faces competition issues from the likes of the Zytiga drug and Medivation's enzalutamide drug.

Older Molycorp gains in trade

Molycorp's 3.25% convertibles due 2016, a $230 million deal that priced in June 2011, traded up 2.5 points to 62 bid, 63 offered.

Molycorp shares surged $1.76, or nearly 20%, to $10.70 in heavy trade.

The Molycorp 3.25% paper is an out-of-the-money issue, with an initial conversion price of $71.40.

Molycorp's 6% convertibles due 2017, which is a $400 million deal that priced in August, was not heard in trade. The 6% convertible has an initial conversion price of $12.00.

Molycorp didn't make any organizational or development announcements that would have pushed the shares so much higher.

It was believed that insider buying of the shares, which have lost nearly 75% of their value in the last year, triggered hectic buying of the securities. The shares have heavy short interest, and it wasn't known if short covering may have helped stir the outsized gains.

Molycorp is a rare earth minerals producer.

Mentioned in this article:

AMR Corp. Pink sheets: AAMRQ

A123 Systems Inc. Pink sheets: AONEQ

Bottomline Technologies Inc. Nasdaq: EPAY

Dendreon Corp. Nasdaq: DNDN

Molycorp Inc. NYSE: MCP

Oclaro Inc. Nasdaq: OCLR

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