New Omnicare does well on debut; Ixia pulls up in the end; Clearwire quiet in the gray

By Rebecca Melvin

New York, Dec. 2 - The convertible bond market had three new issues to work with on Thursday, with the newly priced Omnicare Inc. 3.75% convertibles definitely the focal point of action, trading at 101 ahead of the stock market open and then pulling higher with the underlying shares.

"Omnicare was very active," a New York-based sellside trader said of the $500 million deal that priced at the midpoint of talk, which was 3.5% to 4% for the coupon and 20% to 25% for the initial conversion premium.

Omnicare's existing 3.25% convertibles, which are being tendered with proceeds of the new deal, were quiet on Thursday after trading off a little when the deal was launched as investors freed up some cash to buy the new paper, a NewYork-based sellside trader said.

Ixia Inc.'s newly priced 3% convertibles didn't look that strong at the start of the session, with its shares moving lower. But later, the new bond, which was upsized and priced pretty well and is only five-year paper preferred in the market, as well as a decent credit, notched a 103 trade, sellsider said.

A third deal in the market that launched Thursday was Clearwire Corp.'s $500 million offering of 30-year exchangeable notes. The exchangeables were "very quiet" in the gray market ahead of final pricing expected after the market close, but at about 4 p.m. ET, there was a gray market bid of plus 0.125 point for the Clearwire convertibles.

"It was a bid; that doesn't mean it was a great bid," a New York-based sellside trader said.

Borrowing the stock of Clearwire, a high-yield name, was said to be a problem and curbed hedge player interest.

Back in established issues, Lennar Corp.'s two convertibles were in trade again and sharply higher along with their underlying shares after the latest pending home sales figures spiked 10.4% month-over-month for October instead of remaining flat as analysts expected.

Lennar's new 2.75% bonds, which priced in early November, traded at 102.5 versus a share price of $17.25, compared to 98 versus a share price of $15.75 on Wednesday.

The older Lennar 2% convertibles due 2020 traded at 96.5 versus a share price of $17.25, compared to 94.5 versus a share price of $15.75 on Wednesday.

Omnicare does well on debut

Omnicare's 3.75% convertibles traded up to 101 ahead of the market open Thursday and were seen at 102.375 early.

One sellsider said it traded at 102 versus a share price of $22.50. But later in the day, with its shares pulling up, the new Omnicare convertibles were 103 bid, 104 offered.

Shares of the Covington, Ky.-based pharmaceutical services company moved higher into the close, settling up $1.00, or 4.5%, to $23.22.

The company priced a new $500 million offering of 15-year convertible senior subordinated notes that was non-callable for eight years.

"OCR was better with the stock market" a sellsider said. "It was par and a half to par and five-eights before the stock took off."

The paper was hedged up on a pretty high 70% delta probably due to its long maturity, the sellsider said.

"There were some flippers, but a fair amount of people kept that one on," he said.

The registered, off-the-shelf offering priced at the midpoint of talk, which was for a 3.5% to 4% coupon and a 20% to 25% initial conversion premium.

There is a $75 million greenshoe.

The notes will be non-callable until Dec. 15, 2018 and then provisionally callable subject to a 120% price hurdle over the conversion price. There are no puts.

There is contingent interest triggered at 120%, or 37.5 basis points per six-month interest period.

Net proceeds will be used to help repurchase up to $525 million of Omnicare's 3.25% convertible debentures due 2035 under a tender offer launched Nov. 17.

Some or all excess proceeds will be used to repay outstanding debt, with any remaining for general corporate purposes.

Barclays Capital Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC were the joint bookrunners of the offering. Co-managers were Wells Fargo Securities LLC, Mitsubishi UFJ Securities (USA) Inc., RBS Securities Inc. and SunTrust Robinson Humphrey Inc.

Ixia adds on debut

Ixia's newly priced 3% convertible senior notes saw an early market of 102 bid, 105 offered and later traded at 103.

Shares of the Calabasas, Calif., provider IP test systems fell 37 cents, or 2.5%, to $14.60 in heavy volume on Thursday.

Ixia priced an upsized $175 million five-year convertible senior notes at the rich end of talk. The Rule 144A deal was initially expected to be $125 million in size.

Initially upon release for secondary dealings, Ixia shares were selling off, but market players finally started to flip the paper and it got better, a New York-based sellside trader said.

There was some shorting of the shares on Wednesday that continued into Thursday.

"These things go through a process depending on allocations and which accounts they go to," the sellsider said.

"It was upsized and maybe people got everything they wanted and then continued shorting. People were not flipping out right away, and then they flipped out on a bit of strength," the sellsider said.

"It was priced pretty well; it's a decent company, not a bad credit, and only five-year and people like that, and it's new name," the sellsider said.

The deal was sold by bookrunners Deutsche Bank Securities Inc. and Stifel, Nicolaus & Co., with JMP Securities LLC and Lazard Capital Markets LLC as the co-managers.

The notes will be non-callable for life, with no puts. They have dividend and takeover protection and stock settlement.

Proceeds are earmarked for general corporate purposes, potential future acquisitions and strategic transactions.

Clearwire shares drop

Shares of Clearwire dropped 92 cents, or 13.5%, to $5.90 after the Kirkland, Wash.-based wireless broadband services provider announced that it was going to try to raise about $1.1 billion in straight notes and convertibles that would be used for working capital and for general corporate purposes, including capital expenditures.

The $500 million offering of 30-year convertibles was quiet in the gray market but had a plus 0.125 point bid at the end of the session.

The convertibles were talked to yield 8% to 8.5% with an initial conversion premium of 17.5% to 22.5%. That compared to the second-priority straight bonds that were talked at a 12% handle.

Concurrently with the convertibles deal, Clearwire is pricing $175 million of first-priority straight notes due 2015 and $500 million second-priority straight notes due 2040.

The issue was valued with a credit spread of 1,700 basis points over Libor and a high vol., according to one sellsider.

The credit quality and duration of the issue was weighing on the issue, but the real problem was that there wasn't enough stock to borrow and that put an additional 5 points to 8 points of expense on the deal.

"For plain vanilla convert accounts, it's not very attractive," a sellsider said.

The notes will be non-callable for seven years with no contingent exchange trigger. There are puts in years seven, 15, 20 and 25.

There is dividend and takeover protection and cash or stock settlement.

Mentioned in this article:

Clearwire Corp. Nasdaq: CLWR

Ixia Inc. Nasdaq: XXIA

Lennar Corp. NYSE: LEN

Omnicare Inc. NYSE: OCR

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