Cemex bonds mixed on exchange deal; Omnicare slips on swap on buyout news; Vipshop adds

By Rebecca Melvin

New York, May 21 – Convertibles traders were busy with Cemex SAB de CV Thursday after the Monterrey, Mexico-based cement producer agreed to exchange about $626 million of its Cemex 3.25% convertibles due 2016 for new 3.72% convertibles due 2020 plus shares.

The existing Cemex bonds traded better on a swap basis, while the new paper struggled, a New York-based analyst said.

Also trading actively in the convertibles space was Omnicare Inc. after news that CVS Health Corp. is buying the Cincinnati-based pharmacy services provider for $98.00 per share in cash plus the assumption of $2.3 billion of debt. Two Omnicare bonds came in a little on a hedged basis, while shares rose, the analyst said.

Vipshop Holdings Ltd.’s convertibles dropped on an outright basis along with lower shares of the Guangzhou, China-based online discount retailer, but on a swap basis, the bonds expanded slightly, a New York-based trader said.

The convertibles of Trina Solar Ltd., a Chinese solar company, were not heard in trade despite an 11% pop in the underlying shares after the company reported better-than-expected earnings.

The Trina 3.5% convertibles and 4% convertibles were previously seen around par.

The overall convertibles session was described as lackluster, with trading action starting to wind down ahead of the long holiday weekend for Memorial Day, a trader said.

“We traded a few things, but nothing of note. There wasn’t price action either way and mostly people are closing down shop for the weekend.”

As for new deals, the week was light. Interactive Intelligence Group Inc. priced $150 million of five-year convertible senior notes at the rich end and beyond the rich end of talked terms late Tuesday, but the 1.25% bonds struggled in the aftermarket.

“I think guys were not very happy,” a trader said of the new Interactive Intelligence convertibles. “Outrights didn’t participate and hedge funds were over-allocated. They tried to flip it back to the underwriter and they may or may not have been successful,” a trader said.

Cemex trades mixed

Both Cemex 3.25% convertibles, the A and B tranches, traded better on the exchange deal. They were up about 0.625 point on a hedged basis.

The new 3.72% convertibles due 2020 initially struggled, trading down 1.25 points post issue. But they recouped some ground and were last seen down about 0.75 point.

Cemex shares finished the day little changed at $10.09, which was off 3 cents.

The company is offering to issue $321 million of new 3.72% convertibles at terms that are substantially the same as the existing 3.75% convertibles issued in March. Cemex is also offering about 42 million American Depositary Shares.

“We were busy with that and OCR,” a New York-based trader said.

Omnicare slips on swap

Omnicare’s new and old 3.25% convertibles were down 0.25 point and 0.75 point, respectively, on a hedged basis.

Shares of the Cincinnati-based pharmacy services provider ended up $1.63 at $96.26.

The deal with CVS represents “a small premium to where the Omnicare was trading. With the assumption of debt, it’s not a crazy premium that they paid,” a trader said.

CVS Health will pay about $12.7 billion for Omnicare, including debt. CVS expects to achieve significant purchasing and revenue synergies as well as operating efficiencies. The deal is expected to be about 20 cents accretive to adjusted EPS in 2016, its first full year, excluding integration and any one-time transaction costs, according to the companies’ news release.

The combination is expected to become increasingly accretive to adjusted earnings per share in subsequent years. CVS has secured $13 billion in fully committed unsecured bridge financing from Barclays and expects to put in place permanent financing in the form of senior notes and/or term loans prior to the transaction closing.

CVS Health expects that it will continue to have a solid balance sheet and, with its strong free cash flow, is committed to returning to its targeted leverage ratio of 2.7 times adjusted debt to EBITDA

Vipshop expands

Vipshop’s 1.5% convertibles due 2019 crossed the Trace tape late in the day at 128.5, which was down about 4 points on the day on an outright basis but up on a swap basis by about 0.75 point, depending on delta, traders said.

Vipshop shares ended down 70 cents, or 2.8%, at $24.79. But at one point they had been down as much as 8%.

The Chinese-based online retailer was weighed down by a class action lawsuit announced by litigation firm Milberg LLP, which claims that Vipshop manipulated and over-stated sales.

The suit is being brought on behalf of purchasers of Vipshop securities from between Feb. 17, 2015 and May 11, 2015 and was filed in the U.S. District Court for the Southern District of New York.

Mentioned in this article:

Cemex SAB de CV NYSE: CX

Interactive Intelligence Group Inc. Nasdaq: ININ

Omnicare Inc. NYSE: OCR

Trina Solar Ltd. NYSE: TSL

Vipshop Holdings Ltd. Nasdaq: VIPS

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