Whiting Petroleum improves; Iconix 2.5% convertibles claw back; Impax slips; PTC to price

By Rebecca Melvin

New York, Aug. 10 – Energy convertibles, which have been pushed down significantly in recent weeks, remained in focus in U.S. convertibles on Monday as crude oil prices enjoyed a little bounce and as summer doldrums remained in effect.

Whiting Petroleum Corp. was trading notably better after the Denver-based oil and gas exploration and production company received an upgrade that lifted the common stock, traders said.

The Whiting 1.25% convertibles due 2020 were quoted at 86.25 bid, 87.25 offered in the early going when Whiting’s common shares were around $19.00, or up nearly 7%. But shares ended even higher at more than $20.00, a gain of 12%.

Other energy names looking better were Emerald Oil Inc.’s 2% convertibles, which were indicated up at 39 from 36 recently, and Penn Virginia Corp.’s 6% convertibles, which were up at the close to 25 from 22.

Elsewhere, Iconix Brand Group Inc.’s convertibles were in focus, with the Iconix 2.5% convertibles clawing back about 5 points after tanking on Friday along with sharply lower common shares of the New York-based brand management company after the company announced that its chief executive officer, Neil Cole, is stepping down.

Impax Laboratories Inc. saw its recently priced 2% convertibles trade around 101, which was the previous bid side of the market for the specialty pharmaceutical company. The company, based in Hayward, Calif., reported a second-quarter loss that missed estimates.

After the market close, PTC Therapeutics Inc. launched an offering of $125 million of seven-year convertible senior notes in an overnight deal talked to yield 2.5% to 3%.

Whiting edges up

Whiting’s 1.25% convertibles due 2020 traded at late morning at around 85.25 bid, 85.75 offered versus an underlying share price of $19.00, according to a New York-based trader.

A second source put the market at 86.25 bid, 87.25 offered.

Whiting shares surged on Monday to close near its highs at $20.11, which was up 12%.

About three weeks ago, the Whiting convertibles were around 95 with the underlying shares around $25.00. And it wasn’t long before that that the paper was above par.

One source cited the upgrade of Whiting Petroleum’s shares by CLSA early Monday for the pop.

Analysts for CLSA upgraded the shares to “outperform” from “underperform.” CLSA also put a price target on the shares of $20.00. That was down from the research firm’s earlier target of $39.00.

Whiting shares have moved from a 52-week high of $92.92 to a 52-week low of $17.08, which was notched last week.

Whiting shares have tumbled with crude oil prices.

Iconix 2.5% bond claws back

Iconix’s 2.5% convertibles due 2016 clawed up to about 92 on Monday from a drop to 87 on Friday. Previously the bond was at 97.

Iconix’s 1.5% convertibles due 2018 were not as actively traded but edged up to near 80 by the end of the session from 78 on Friday. Previously the bonds were at 92.

Pulling the convertibles and common shares lower was news that the company’s chief executive, chairman and president, Neil Cole, is leaving the company that he founded.

On Monday, the company reported a weaker-than-expected profit for its second quarter, which left the shares down another 35 cents, or 2.4%, to $14.57, after sliding $4.68, or 24%, in heavy volume on Friday.

“Friday’s action was one of the greatest examples of mispricing one could want to see,” a New York-based trader said of the Iconix convertibles.

“The 2.5’s at day’s end were 20% to maturity, while the 1.5% were 11.5%. There was no logical way the 1.5% [bonds] should have been tighter, but that condition lasted all afternoon,” the trader said.

“The 2.5’s had to improve versus the 1.5’s under any scenario except bankruptcy, which shows the fear in the market,” the trader said.

He suspected that if the stock holds near $15.00, then the 2.5% convertibles will improve further. He suspected that they would recover to the 96 level or so, given the current stock price.

On Friday, Iconix announced that Cole, who was CEO, chairman and president, and also a member of the board, was stepping down and being replaced on an interim basis by board member Peter Cuneo.

Cole founded the company in 2006 and has served as its CEO since that time. His departure follows the resignations of both the chief financial officer and chief operating officer earlier this year after questions regarding the company’ accounting methods surfaced.

The New York-based brand management company said Cole intends to pursue other business opportunities. But he will serve as special adviser to the company through the end of September to assist in the transition process.

Impax slips with shares

Impax’s 2% convertibles due 2022 were seen trading at 101 at the end of Monday.

Impax shares ended down $1.43, or 3%, at $45.64.

Impax priced the $600 million of the convertible senior notes in June via RBC Capital Markets LLC as the bookrunner.

In addition to a second-quarter loss, Impax announced that it is selling its U.S. rights to the Daraprim brand to Turing Pharmaceuticals AG for about $55 million.

Its second-quarter loss was $1.9 million, or 3 cents per share, which was down from a profit in the year-earlier period. Adjusted earnings were 34 cents per share, which was slightly lower than expected.

Impax reported revenue of $214.2 million, which was better than expected.

PTC Therapeutics on tap

PTC Therapeutics launched an overnight deal for $125 million of seven-year convertible senior notes that was expected to price before the market open on Tuesday. The offering was talked to yield 2.5% to 3% with an initial conversion premium of 30% to 35%, according to market sources.

The South Plainfield, N.J.-based biopharmaceutical company is in late-stage trials of its lead product: Translama (ataluren) for the treatment of muscular dystrophy and cystic fibrosis.

The Rule 144A deal has a $25 million greenshoe and was being priced via joint bookrunners Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC.

The bonds are non-callable for three years and then provisionally callable if shares exceed 130% of the conversion price. There are no puts.

Proceeds will be used for general corporate purposes, including working capital and research & development expenditures.

Mentioned in this article:

Emerald Oil Inc. NYSE: EOX

Iconix Brand Group Inc. Nasdaq: ICON

Impax Laboratories Inc. Nasdaq: IPXL

Penn Virginia Corp. NYSE: PVA

PTC Therapeutics Inc. Nasdaq: PTCT

Whiting Petroleum Corp. NYSE: WLL

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.