Convertibles mixed; Transocean, Beckman active; ON Semi's 0s add on incentive; Quanta off

By Rebecca Melvin

New York, April 12 - The week got off to a rather slow start for the convertible bond market Monday, with no true concentration and mostly "one-off trades" in mixed action, as the general trends of low volatility and high valuations continued, market players said.

The CBOE volatility index was down another half a percentage point to 15.64 after having shed 2% on Friday.

"Flow was pretty dismal. There was no strong trend one way or the other," a New York-based sellside analyst said.

Among bigger-volume names in trade during the session was market stalwart Transocean Ltd. Transocean's A paper remained steady as that issue doesn't see big price movements, and there didn't appear to be a particular reason behind the trades, although there has been some renewed investor interest in energy and offshore drilling.

"Certain bonds trade certain days. It just depends when people wake up to it and start trading it," a sellsider said.

Beckman Coulter Inc. was also unusually active, although several sources asked could not pinpoint the reason. Its 2.5% convertibles were lower by about a point on shares that lost 1.5%.

Amgen Inc. was also a little lower amid weakness in its underlying shares, which ended down a percentage point.

There was some convertible-specific news that drove trades of ON Semiconductor Corp., which saw its 0% convertibles move up to 102 after the Phoenix-based semiconductor company offered an incentive to holders to prevent them from putting the paper back to the company this week.

Quanta Services Inc. was also active after the electric power contractor said it planned to redeem early its 3.75% convertibles due 2026.

The primary market was quiet, although after the close of markets Popular Inc. launched an offering on Monday of about $900 million of convertible common equivalent securities, but these are not seen as true convertibles but rather are sold as stock to investors, a syndicate source said.

Beckman, Amgen lower

Beckman Coulter's 2.5% convertibles due 2036 were at 109.75, a level which was down from about 110.75 previously.

Shares of the Brea, Calif.-based biomedical testing equipment company lost 91 cents, or 1.5%, to $61.13 on Monday.

Amgen's 0.125% convertibles due 2011 traded at 98.75, which was down a point from 99.75.

One sellsider saw them trade early in the session at 99.5 versus a share price of $60.90.

Amgen's 0.375% convertibles due 2013 traded at 101.375, which was down just 0.125 point.

Shares of the Thousand Oaks, Calif.-based biotechnology company ended down 53 cents, or 0.87%.

Amgen announced Monday that results from several preclinical studies investigating potential new cancer agents and a comprehensive biomarker analysis will be presented starting April 17 at the American Association for Cancer Research annual meeting in Washington, D.C.

The trial used massively parallel, next-generation sequencing technology to investigate whether mutations in nine genes are predictive of response to Vectibix in metastatic colorectal cancer, the company said in a release.

In addition, results will be presented from a preclinical study of RANK ligand (RANKL) inhibitor against mammary tumor formation in mouse models. Additional presentations include data from Amgen's emerging oncology therapeutics portfolio, which provide further experience and biologic understanding from key research areas. Amgen currently has 16 molecules in development for oncology in preclinical through phase 3 clinical trials.

"The data presented at AACR highlight the important scientific advances that are being made in cancer research," Roger M. Perlmutter, Amgen's executive vice president of research and development, said in the release. "We hope and expect that these important preclinical studies will permit us to develop dramatically improved therapies for patients suffering from malignant disease."

ON adds on new put, more call protection

ON Semiconductor's 0% convertibles due 2024 traded at 102 on Monday, which was up a couple of points after the company added a put option on April 15, 2012 for those who do not require the company to purchase their securities this year on April 15.

In addition to the future put option, the company said it added additional call protection, eliminating its ability to redeem the notes at its option until April 15, 2012.

As of now, holders may put back all or a portion of the notes at a price equal to 100% of the total principal amount of the notes prior to 5 p.m. ET on April 13.

The 2012 put option is meant to benefit those who forgo the upcoming put option.

Prior to the amendment, ON Semiconductor said it would have been able to redeem the notes at its option at any time from April 15.

"As of the end of the fourth quarter of 2009, we had approximately $571 million of cash, cash equivalents and short-term investments on our balance sheet," Donald Colvin, ON Semiconductor executive vice president and chief financial officer, said in a news release.

"The amendments to the notes provide a mechanism for ON Semiconductor to extend zero-coupon debt based upon feedback from certain bondholders and provide additional financial flexibility to use excess cash to retire other higher coupon debt instruments."

ON Semiconductor said previously that it planned to use cash to purchase the notes. The total purchase price will be about $99.4 million if all the outstanding notes are surrendered for purchase under the put option.

ON Semi's 2.625% convertibles due 2026 moved down about 3 points to trade at 102 on Monday, and ON Semi's 1.875% convertibles due 2025 were not seen in trade and were last at 131.432.

Shares of the semiconductor company ended down 6 cents, or 0.7%, at $8.38 on Monday.

Quanta slips on early redemption

Quanta's 3.75% convertibles due 2026 traded at 101.9 on Monday, which was down 1.475 points from previous levels.

Shares of the Houston-based electric contracting services company settled down 34 cents, or 1.7%, at $20.00.

The company said it would redeem the notes May 14 at a price equal to 101.607 of the principal plus accrued and unpaid interest to the redemption date.

The company issued $143.75 million worth of the notes in May 2006.

Holders have the right to take cash or convert each $1,000 in principal amount of the notes into 44.6229 shares of Quanta stock, or $22.41 per share.

Popular to price

Shares of San Juan, Puerto Rico-based financial service company Popular ended at $3.05, which if used as a reference price, would put the new issue of about $900 million of convertible common equivalent securities at nearly 300 million shares.

Morgan Stanley is the bookrunner, with Popular Securities, Keefe Bruyette & Woods and UBS Investment Bank acting as co-managers of the offering, which was seen pricing after the close on Tuesday.

The security is similar to other bank offerings made recently, including Bank of America Corp.'s issue in December 2009 of common equivalent securities that automatically convert into shares upon a shareholder vote. Popular is required to hold a shareholder vote by Sept. 15, 2010.

If shareholder approval is not obtained, then the dividend will be an as-converted dividend with a 13% step up, plus an additional 1% step up every six months for a 16% maximum.

Popular intends to use proceeds of the offering for general corporate purposes, including investments in, or extensions of credit to, its subsidiaries to increase their capital, including positioning Popular to participate in FDIC-assisted transactions.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Beckman Coulter Inc. NYSE: BEC

ON Semiconductor Corp. Nasdaq: ONNN

Popular Inc. Nasdaq: BPOP

Quanta Services Inc. NYSE: PWR

Transocean Ltd. NYSE: RIG

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