WebMD active, unchanged as shares surge; AMR firms; Cobalt to price $1.2 billion offering

By Rebecca Melvin

New York, Dec. 11 - WebMD Corp.'s convertibles saw a solid bid and traded actively but little changed Tuesday after the Elmwood Park, N.J.-based provider of online medical information announced cost-cutting measures, including 250 employee layoffs, or about 14% of its workforce, effective at the end of the year.

WebMD's shares jumped $1.60, or nearly 12%, on the announcement.

Dendreon Corp.'s convertibles extended gains, trading above the 70 mark, which was better by a point or more, as shares reversed some of Monday's gains.

The convertibles of bankrupt AMR Corp. continued to firm following a busy day of news on the Fort Worth-based air carrier and for the sector in general.

Overall volume in the convertible bond market improved on Tuesday from Monday, but a large chunk of it was in liquid, higher-quality credits, which were moving primarily to keep step with the underlying equities.

Both Intel Corp. convertibles were active as shares of the Santa Clara, Calif., chipmaker were lifted 57 cents, or 2.8%, to $20.65. The older 2.95% Intel convertibles added 0.375 point to 103.625 in busy volume, and the newer 3.25% convertibles traded up nearly 2 points to 118.45 in less active trade, according to Trace data.

Gains in technology stocks led the S&P 500 to its highest mark since Election Day. In the week following Election Day, the index lost 5%.

There was some activity in the new issues that priced last week, with Bottomline Technologies Inc.'s new convertible continuing to push upward and notching trades with a 108 handle on its third day in the market.

In the primary market, Oclaro Luxembourg SA, a subsidiary of Oclaro Inc., priced $25 million of 5.5-year exchangeable senior secured second-lien notes to yield 7.5% with an initial conversion premium of 30%, according to a syndicate source.

And after the market close, Cobalt International Energy Inc. launched a $1.2 billion offering of seven-year convertible senior notes that will be priced early Wednesday and was talked to yield 2.625% with an initial conversion premium of 30%, according to a syndicate source.

WebMD active, unchanged

WebMD's 2.5% convertibles due 2018 traded actively at around 83.5 to 84 on Tuesday as shares of the Elmwood Park, N.J.-based provider of health information services surged $1.60, or nearly 12%, to $15.45 in heavy volume.

Shares are still considerably lower than their 52-week high of $40.24.

"There was a solid bid for the bonds, but they didn't do much. There is not a lot of equity sensitivity in the name," a New York-based trader said.

The bonds were basically unchanged on the day, and still down from where they were two weeks ago, the trader said.

He said the end day price was around 83.5.

The online medical information provider said that it will cut jobs as a cost-saving measure to offset a decline in drug-company advertising revenue.

The job cuts are part of a broader program that is intended to reduce operating expenses by about $45 million per year, according to a company news release.

AMR up to 82

AMR's 6.25% benchmark convertible notes due 2014 rose to 82, up from 80 on Monday. The convertibles have risen from about 15 right after the company's bankruptcy filing and have edged ever higher in the last year.

Several reports came out on Tuesday indicating that AMR CEO Thomas Horton still intended to retain management of the currently bankrupt airline.

Part of Horton's argument is that AMR - the Fort Worth-based parent of American Airlines - has sped through its bankruptcy proceedings at a pace much quicker than those of United Airlines and Delta Airlines just a few years ago.

But certain creditors, as well as labor unions, have disagreed, believing that the current management is to blame for the filing to begin with.

One creditor group has offered to provide exit financing for the company, provided the entire management team is axed. The pilots' union - which recently approved a new labor contract - has also expressed a desire to see management ousted.

In fact, the pilots' union has also expressed an interest in a merger with U.S. Airways. Some have said that such a combination would be mutually beneficial, though perhaps more so to AMR, as U.S. Airways has been turning profits despite lower revenues.

Meanwhile, hopes of the said merger might have been stoked on Tuesday, as Delta announced it had bought a 45% stake in Virgin Air. Many in the industry and those that focus on the sector have been calling for more consolidation since the days of Delta and United's bankruptcies.

Cobalt on deck

Cobalt's registered, off-the-shelf deal has a big $1.2 billion issue size and a $180 million greenshoe. That represents only the fourth convertible deal this year with a $1 billion face value. The other deals were United Technologies Corp.'s 7.5% mandatory convertible equity units for $1.1 billion, WellPoint's 2.75% convertibles due 2042 for $1.5 billion, and. Priceline.com Inc.'s 1% convertible notes due 2018 for $1 billion.

The Cobalt convertible senior notes are being sold via bookrunners Morgan Stanley & Co. LLC and Goldman Sachs & Co.

The convertibles are non-callable for life, with proceeds going to fund capital expenditures and for general corporate purposes.

Houston-based Cobalt is an independent oil-focused exploration and development company, with a focus in deepwater U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa.

Stephanie Rotondo contributed to this report

Mentioned in this article:

AMR Corp. Pink Sheets: AAMRQ

Bottomline Technologies Inc. Nasdaq: EPAY

Cobalt International Energy Inc. NYSE: CIE

Dendreon Corp. Nasdaq: DNDN

Intel Corp. Nasdaq: INTC

Oclaro Inc. Nasdaq: OCLR

WebMD Corp. Nasdaq: WBMD

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.