Spectranetics gains on swap after quarterly loss; new Cinedigm trades at 101 to 103

By Rebecca Melvin

New York, April 24 – Spectranetics Corp.’s convertibles fell on an outright basis but expanded on a dollar-neutral, or hedged, basis on Friday after the Colorado Springs, Colo.-based medical device maker reported a quarterly loss that was worse than expected.

The Spectranetics bonds expanded 2 points or more, market sources said, and represented one of the best convertible arbitrage moves of the week.

“That and Iconix were the best moves of the week,” a New York-based sellsider said.

On Monday, Iconix Brand Group Inc.’s convertible bonds expanded 2 to 3 points in active trade as investors reacted to word of a manager exit.

Also on Friday, HomeAway Inc.’s convertibles were lower outright but expanded about a point on a hedged basis as shares of the Austin, Texas-based vacation rental site fell 15.5% on a lowered outlook.

The HomeAway 0.125% convertibles were seen last wrapped around 94, with the stock at $27.68.

In the primary market, Cinedigm Corp.’s newly priced 5.5% convertibles traded up a point or two on an outright basis on Friday after the New York-based distribution rights company priced $64 million of the senior notes at the cheap end and beyond the cheap end of talk, a syndicate source said.

The Cinedigm bonds were quoted at 101 bid, 103 offered when the underlying shares were up by at least 2 cents, or 2%, to $0.99. The shares ended down 2 cents, or 2%, at $0.951, extending its 23% plunge on Thursday.

Pernix Therapeutics Holdings Inc.’s 4.25% convertibles, which priced last week, were quoted at 99.25 bid, 100.5 offered versus a share price of $7.33 early Friday. Shares of the Morrisville, N.J.-based specialty pharmaceutical company ended down 24 cents, or 3.27%, at $7.09.

Pernix priced an upsized $130 million of the six-year notes at mixed terms compared to talk on April 16.

Before that, the most recent new issue in the market was Trinity Biotech plc’s $115 million 4% exchangeable senior notes, which priced via Raymond James on April 2.

April’s primary market has yielded only four small deals so far. In all there has been $326 million in new issuance in four deals for the month so far, compared to $845 million in four deals priced in all of April 2014.

Spectranetics expands

Spectranetics’ 2.625% convertibles due 2034 fell about 17 points on an outright basis to about 112.5. But the bonds expanded about 2 points on a dollar-neutral, or hedged, basis on a delta of about 80% when shares of the maker of single-use medical devices fell $7.60, or 22%, to $27.21.

The shares dropped further into the close, settling at $26.52, which was down $8.18, or 24%.

The bonds were last indicated at 109. That was down from about 129 previously.

Spectranetics reported a loss of $27.3 million, or 65 cents per share, for its first quarter, compared to a loss of $5.7 million, or 14 cents per share, for the year-earlier period.

Excluding one-time items and including acquisition related items, the loss was 30 cents per share, which missed expectations for a loss of 24 cents per share.

Spectranetics posted lower-than-expected revenue of $57.4 million, compared to estimates for $60.6 million in revenue.

The full-year loss is expected to be 97 cents per share on revenue of between $258 million and $265 million.

But the company was guiding to the low end of the range, citing the potential impact of competition in the U.S. AngioSculpt business.

Prior to the earnings news, Spectranetics shares had been on a tear, climbing 41% in the 12 months to Thursday.

Spectranetics priced $230 million of the bonds due 2034 via Piper Jaffray & Co. last June.

New Cinedigm adds

Cinedigm’s 5.5% convertibles due 2035, another Piper deal, traded at 101 bid, 103 offered with the underlying shares at $0.99.

The company priced $64 million of 20-year convertible senior notes after the market close on Thursday at par to yield 5.5% with an initial conversion premium of 25%, according to a pricing term sheet.

Pricing came beyond the cheap end of coupon talk of 4.5% to 5% and at the cheap end of 25% to 30% premium talk.

There is no greenshoe. Initially the Rule 144A deal was talked at a $60 million base deal and $9 million greenshoe.

The notes are non-callable for three years and then are provisionally callable for two years if shares exceed 130% of the conversion price for 20 out of 30 consecutive trading days. There are puts in years five, 10 and 15.

About $18.2 million of the proceeds will be used to repay borrowings under the company’s term loan, with remaining proceeds to repurchase common stock under a forward stock purchase agreement, and for working capital and general corporate purposes, including development of the company’s OTT channels and applications and possible acquisitions.

In connection with the offering, the company intends to enter into a privately negotiated forward stock purchase transaction with a financial institution, under which the company will purchase about 11.8 million shares of common stock at $0.97 each. The counterparty will deliver shares in settlement on or about the fifth anniversary of the issuance of the notes.

Concurrently with the notes offering, Cinedigm is entering into an amendment to its credit agreement with Societe Generale and other lenders, which will extend the term of the revolving loans to March 31, 2018. It will also provide for the release of the equity interests in the company’s subsidiaries and change the interest rate to a base rate plus 300 basis points or Libor plus 400 bps, at the company’s election.

New York-based Cinedigm manages distribution rights of independent movie and television content.

Mentioned in this article:

Cinedigm Inc. Nasdaq: CIDM

HomeAway Inc. Nasdaq: AWAY

Iconix Brand Group Inc. Nasdaq: ICON

Pernix Therapeutics Holdings Inc. NYSE: PTX

Spectranetics Corp. Nasdaq: SPNC

Trinity Biotech plc Nasdaq: TRIB

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