Radius Health prices, dips below issue price; BioMarin busy; Priceline falters post-earnings

By Stephanie N. Rotondo

Seattle, Aug. 9 – Another new issue hit the convertible bond market on Wednesday, as Radius Health Inc. priced $300 million of 3% convertible notes due 2024.

The deal came with an initial conversion premium of 32.5%, at the cheap end of price talk. The yield came in the middle of the 2.75% to 3.25% price talk.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the joint bookrunners. Citigroup Global Markets Inc. is also a bookrunner, and Leerink Partners LLC is a manager.

Post-pricing, a trader said the new bonds – the company’s inaugural convertible deal, in fact – were not doing well, seeing them trade down to a 99.25 to 99.5 context.

“Guys can’t borrow the stock to set them up,” the trader speculated. “Either it’s too costly or it’s not available.”

The issue came at par.

The company’s stock wasn’t doing much better, sliding $1.85, or 5.04%, to $34.98.

Conversions will be settled in common stock, cash, or a combination of both, at the company’s option. The initial conversion rate is 20.4891 shares per each $1,000 of notes, equal to an initial conversion price of $48.81 a share.

Meanwhile, BioMarin Pharmaceutical Inc.’s $450 million of 0.599% convertible notes due 2024 – a deal that priced late Monday – remained in play, according to a trader.

The trader pegged the notes in a 97 to 97.5 range, about in line with the previous session.

The issue came at 98% of par.

As for the company’s stock, it slipped 30 cents to $85.16.

BofA Merrill Lynch led the deal, with J.P. Morgan Securities LLC and Goldman Sachs & Co. acting as joint bookrunners.

The terms of the deal were deemed a bit odd, given the strange coupon, the fact that it priced at a discount and that it came with an initial conversion premium of 40%. After Tuesday’s session, one trader opined that it was a bought deal, thus the awkward terms.

Away from new issues, Priceline Group Inc.’s convertibles were trading lower despite reporting earnings late Tuesday that beat expectations.

However, the company’s forecast for the current quarter did not appear to please investors.

Also moving about on earnings was Cobalt International Energy Inc. Like Priceline, the company posted the results after Tuesday’s close.

Come Wednesday, the bonds were seen trading mixed while the underlying shares held steady.

Then there was Red Hat Inc., which seemed to be trading actively on no news at all, according to a trader.

“But it’s trading a lot,” he said.

He saw the 0.25% convertible notes due 2019 trading at “138 and change,” which he said equaled a premium of about 6.5%.

“You could make some hay with the options here,” he said.

Another source placed the paper on either side of 138, which compared to levels around 140 previously.

Red Hat’s shares meantime dipped 37 cents to $97.70.

Priceline softens

Priceline Group’s convertible bonds were trading actively – and lower – on Wednesday as the company’s stock experienced “a legit move,” a trader said.

The trader noted that the stock tends to move a shade here and there, which can result in surges of activity in the debt. But the surges rarely cause noticeable price moves, he said.

That was not the case in the midweek session, however.

One market source saw the 0.9% convertible notes due 2021 ending in a 115.5 to 116 range, which compared to trades as high as 120.5 on Tuesday.

Another source pegged the 0.35% convertible notes due 2020 at 149, a loss of nearly 10 points on the day.

As for the underlying stock, it dropped $142.20, or 6.94%, to $1.906.80.

For the second quarter, Priceline reported adjusted income of $15.14 per share on revenue of $3 billion.

Analysts polled by Zacks Investment Research had expected adjusted EPS of $14.27 on revenue of $3 billion.

For the third quarter, Priceline wasn’t as optimistic, forecasting adjusted EPS of $31.70 to $33.40.

Polls from Zacks indicated expectations of $34.42 a share.

Cobalt trades mixed

A trader said Cobalt International’s 2.625% convertible notes due 2019 “improved nicely” in midweek trading, moving up to 30.375 from previous levels around 29.

However, he added that the 3.125% convertible notes due 2024 “traded in a little bit,” ending at 25.5 bid, 25.75 offered.

He noted that the debt had been around 26.

“It looks like there was a large seller and a lot of buyers around,” he remarked, accounting for why that issue was weaker while the 2.625% convertibles were higher.

Cobalt’s equity finished the day unchanged at $2.25.

The Houston-based oil and gas company reported second-quarter earnings late Tuesday, showing a net loss of $185.6 million, or $6.28 a share.

On an adjusted basis, the loss per share narrowed to $2.39.

Revenue was $13.7 million.

Mentioned in this article:

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Cobalt International Energy Inc. NYSE: CIE

Priceline Group Inc. Nasdaq: PCLN

Radius Health Inc. Nasdaq: RDUS

Red Hat Inc. NYSE: RHT

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