Teleflex adds slightly in gray market, prices; MGM strengthens; PHH gains after debt issue

By Rebecca Melvin

New York, Aug. 3 - Teleflex Inc. was minimally better in the gray market Tuesday ahead of final terms expected after the market close.

Teleflex's planned $350 million of seven-year paper was bid plus 0.25 point initially and later in the session was plus 0.5 point to 0.75 point, market sources said. The issue later priced at par to yield 3.875% with an initial conversion premium of 15%.

MGM Resorts International was up about 2 points outright on Tuesday after the casino operator reported a wider-than-expected second-quarter loss amid an impairment charge related to its loss-making CityCenter resort in Las Vegas.

The company was formerly known as MGM Mirage and changed its name to MGM Resorts International on June 15.

PHH Corp. was pulled into trade as its underlying shares surged 11% after the mortgage-service provider reported strong core earnings growth, was upgraded, and announced a new debt issue.

Meanwhile, Omnicare Inc. continued to trade after management changes announced Monday. The Omnicare 3.25% convertibles due 2035 were up 0.75 point to 85.5 on a 10-cent stock price increase to $24.50.

Most of the moves in trade Tuesday, which was a little more active than on Monday, were related to earnings and other news.

"What you need is a catalyst. Without earnings or a debt deal - PHH said it was going to sell a six-year deal - they wouldn't trade," a New York-based sellside analyst said.

The trades on earnings and debt news are expected, the analyst said. But what wasn't expected was the "monster print" in Virgin Media. "Now that's something to talk about," the analyst said.

Virgin Media Inc. was active, with its underlying shares also seeing volume, after the New York-based provider of communications services in the United Kingdom announced the results of an exchange offer of all $1 billion of its 6.5% senior notes due 2018 and £875 million of its 7% senior secured notes due 2018.

"I don't really know what it was. It could be coming off an asset swap. It was a big print of $90 million [of bonds], is what I heard," the analyst said.

Alcoa Inc. was also in trade after tender offer news on its 6.5% notes due 2011. The tender offer, which expired Monday, was $253.41 million, representing 43% of the $583.47 million of the 2011 notes outstanding.

Holders of the 2011 notes accepted for purchase will receive $1,048.75 per $1,000 principal amount of notes, plus accrued and unpaid interest.

Teleflex adds in gray

Teleflex's new $350 million of convertibles expected to price after the close Tuesday were seen in the gray market at as much as plus 0.75 point during the day.

That wasn't as high as some of the valuations put on the paper by analysts.

The planned Teleflex paper was seen at 101.25 at the midpoint of talk, using a credit spread of 650 bps over Libor, 25% volatility and 50 bps of borrow, according to a New York-based sellside analyst.

The analyst said that he believed a good comparable on the credit was Hologic Inc.

The common stock sunk 6% to $53.32 on the day.

The registered deal, being talked to yield 3.5% to 4% with an initial conversion premium of 15% to 20%, was seen cheaper by another analyst, who said he didn't hear that the deal was well liked.

Nevertheless, the deal, which was not particularly large - although not terribly small - with its coterie of underwriters was expected to get done easily, especially amid the dearth of new issuance in the convertibles market and buyer demand.

The deal "is not too small. A medium deal is $250 million. It's going to get done," a sellsider said.

Teleflex prices

After the close, Teleflex sold $350 million of seven-year convertibles at par to yield 3.875% with an initial conversion premium of 15%. There is a $50 million greenshoe.

The Teleflex convertible offering is being made as part of a refinancing package that includes amending certain terms of Teleflex's senior secured credit facilities from 2012 to 2014, repaying $200 million under the senior secured credit facilities, and prepaying Teleflex's $196.6 million outstanding of senior notes issued in 2007 and maturing in 2012 and 2014.

Joint bookrunners include Goldman Sachs & Co., as left lead, Jefferies & Co. Inc., Morgan Stanley & Co. Inc., Bank of America Merrill Lynch and J.P. Morgan Securities Inc.

Limerick, Pa.-based Teleflex is a provider of single-use medical devices, including catheters and surgical products.

MGM up 2 points

MGM's 4.25% convertibles were active Tuesday and traded at 93 versus a share price of $11.50, compared to 91 versus a share price for $11.15 last Thursday.

Shares of the Las Vegas-based casino resort owner and operator settled down 10 cents, or 0.9%, to $11.17.

MGM posted a second-quarter net loss of $883.5 million, or $2.00 a share, for the second quarter, compared with a loss of $212.6 million, or 60 cents a share, a year earlier.

Excluding one-time items, including a $1.64-a-share impairment charge tied to the investment in CityCenter, the loss was 35 cents a share. Analysts had expected a loss of 24 cents a share excluding items.

Revenue rose about 3% to $1.54 billion, which was more than the $1.46 billion analysts expected.

PHH adds on debt issue

PHH's 4% convertible senior notes due 2014 traded 110.5 versus a share price of $22.40.

Shares of the Mt. Laurel, N.J.-based outsource provider of mortgage and vehicle fleet management services jumped $2.25, or 11%, to $22.39.

The company's quarterly loss widened to $133 million, or $2.40 per share, from $106 million, or $1.91 per share, from the year-earlier quarter.

The larger loss was due to an unfavorable mark-to-market mortgage servicing rights adjustment of $273 million.

Core earnings were $52 million, up from $28 million in the 2009 quarter.

The company attributed the strong result to strong purchase volumes that increased margins and lower servicing run offs.

The company also said it plans to offer $250 million of 2016 senior notes, using proceeds to repay a portion of amounts outstanding under its revolving credit agreement.

Virgin Media sees high volume

Virgin Media's 6.5% convertibles due 2016 traded in large volume at about 139 to 140, according to a sellside analyst. Shares of the communications company fell 51 cents, or 2.3%, to $21.64.

The large $1 billion, high-delta name has been moving higher with the underlying shares, which crept up through July and jumped July 21.

"It's in-the-money with a high delta so the bonds are going to follow the stock by definition," the analyst said.

On Tuesday, there were several very large prints, the analyst said, attributing a large block of activity to Deutsche Bank, which was an underwriter involved in the original new issue.

Mentioned in this article:

Alcoa Inc. NYSE: AA

MGM Resorts International NYSE: MGM

Omnicare Inc. NYSE: OCR

PHH Corp. NYSE: PHH

Teleflex Inc. NYSE: TFX

Virgin Media Inc. Nasdaq: VMED

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