Penn Virginia gains; planned Exelon adds in gray market; secondary valuations ‘come in’

By Rebecca Melvin

New York, June 11 – Penn Virginia Corp.’s newly priced 6% convertible preferred shares traded up on Wednesday after the Radnor, Pa.-based oil and gas drilling company priced its upsized $275 million of the shares at the talked priced points.

The new Penn Virginia preferreds, which were initially talked at $250 million in size, were quoted at 103 bid, 104 offered with the underlying shares down 8 cents, or 0.6% to $14.03 at late morning, a market source said. Later the shares reversed course and ended up nearly 1%.

The old Penn Virginia 6% convertible perpetual preferreds, which priced in October 2012, were extremely quiet, with no current quote available, the source said.

Exelon Corp.’s planned $1 billion offering of equity units traded higher in the gray market on Wednesday ahead of final terms being set after the market close. The deal was seen at 51.25 bid, 51.5 offered at the close compared to its 50 par.

Also pricing after the market close was j2 Global Inc.’s planned $300 million of 15-year convertible senior notes, which were seen about fair value at the midpoint of talked price points, according to a Connecticut-based source.

TCP Capital Corp.’s planned $100 million of five-year senior notes was also on tap after the market close. That deal was said to have limited to non-existent stock borrow. In addition it was said to have limited distribution to “over-the-wall investors.”

Secondary market valuations sold off again Wednesday on the back of strong new issuance, a New York-based trader said.

There have been two or three sessions of weakening, but it was difficult to quantify how much paper has come off, he said.

A second trader said, “I would say that things were a little weaker again due to new issuance or supply.”

“Overall, the market was lower but without much trading,” he said, adding that lower equity markets weren’t seen as having anything to do with weaker convertibles.

Intel Corp. was very active again, with the Intel 2.95% convertibles ‘coming in’ on Wednesday to a greater degree than the Intel 3.25% convertibles, which took the bigger leg down on Tuesday.

Auxilium Pharmaceuticals Inc.’s 1.5% convertibles due 2018 dropped sharply on an outright basis and were also down 2 points on a dollar-neutral, or hedged, basis, as selling hit that issue amid a drop in the underlying shares, a trader said.

Cobalt International Energy Inc.’s convertibles were trading mixed, with the older Cobalt issue a little weaker by about 0.25 point, while the new Cobalt 3.125% was little bit better.

“I think guys are selling the old ones to make room for the new ones,” a trader said.

After the market close, Ariad Pharmaceuticals Inc. launched an offering of $175 million of five-year convertible senior notes that was seen pricing after the market close Wednesday. And Colony Financial Inc. said it planned to price an add-of $100 million to its 3.875% convertible senior notes due 2021 that priced in January.

Exelon adds in the gray

Exelon’s planned $1 billion of equity units traded up in the gray market Wednesday before final terms were set to 51.25 bid, 51.5 offered, a market source said. The additional points were the equivalent of 2.5 points to 3 points on a basis of 100 par.

The equity units were talked with a 6.75% to 7.25% coupon and a 20% to 25% premium.

Exelon is also offering up to 50 million shares of its common stock.

Proceeds of both offerings will be used to finance a portion of the Pepco Holdings Inc. acquisition announced April 30 and for general corporate purposes.

The units are mandatorily convertible June 1, 2017.

Exelon is a Chicago-based electric and gas utility.

Auxilium drops

Auxilium’s 1.5% convertibles due 2018 traded down to 109 during the session, which was lower by 6 points on an outright basis and down by a couple of points on a dollar-neutral basis as well.

“There was a large seller of about $100 million bonds that was down 2 points,” a New York-based trader said about the dollar-neutral decline.

Auxilium shares were also down, closing off $1.70, or nearly 8%, at $20.09.

The shares sold off after generic drug maker Prasco said that it will begin selling a generic version of Auxilium’s testosterone gel.

As for the convertibles move, a trader said that he didn’t see that the issue would continue to weaken following Wednesday’s session.

“I got the impression that it was kind of done,” he said.

Aria to price

Aria Pharmaceuticals, the Cambridge, Mass.-based oncology company, said that it is planning to price $175 million of five-year convertible senior notes talked to yield 3.25% to 3.75% with an initial conversion premium of 30% to 35%.

The Rule 144A deal was coming on an overnight basis via J.P. Morgan Securities LLC and has a $50 million greenshoe.

The deal is coming together with a call spread.

Proceeds will be used to pay the cost of the call spread and also for operations, including but not limited to sales, marketing, manufacturing and distribution of ponatinib, global development of its other product candidates, including clinical trials, product and process development, manufacturing and other activities, discovery research efforts to add to its pipeline of product candidates and other general corporate purposes.

Cambridge, Mass.-based Ariad is an oncology company with treatments for cancers, including leukemia and lung cancer.

Colony pricing add-on

Real estate investment trust Colony Financial plans to price a $100 million add-on to its 3.875% convertible senior notes due 2021 that priced in January.

The reopening has a greenshoe for up to $15 million of additional notes and is being sold via joint bookrunning managers BofA Merrill Lynch, Barclays, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc.

The notes will be initially convertible at a rate of 40.2941 shares per bond, which is equivalent to about $24.82 per share.

The bonds are non-callable until Jan. 22, 2019 and then are provisionally callable if the company’s shares trade above 130% of the conversion price. The bonds have takeover protection.

Mentioned in this article:

Ariad Pharmaceuticals Inc. Nasdaq: ARIA

Auxilium Pharmaceuticals Inc. Nasdaq: AUXL

Cobalt International Energy Inc. NYSE: CIE

Colony Financial Inc. Nasdaq: CLNY

Exelon Corp. NYSE: EXC

Intel Corp. Nasdaq: INTC

J2 Global Inc. Nasdaq: JCOM

Penn Virginia Corp. NYSE: PVA

TCP Capital Corp. Nasdaq: TCPC

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