New Aegerion flat to better amid weak shares; Nuance bonds active after earnings, call

By Rebecca Melvin

New York, Aug. 12 – Aegerion Pharmaceuticals Inc.’s newly priced 2% convertibles were seen flat to a little better on Tuesday depending on one’s delta, even though the underlying shares remained weak after the Cambridge, Mass.-based biopharmaceutical company priced an upsized $300 million of the senior notes at the rich end of talk.

The Aegerion deal was initially talked at $250 million in size. The bonds were quoted at 99.5 bid, 100 offered near the end of the session with the underlying shares lower by 55 cents, or 1.8% at $30.26.

“It was flat to up a half,” a trader said, referring to a 0.5 point expansion on a hedged basis.

Three other deals were waiting in the wings for pricing after the market close. And two additional deals launched after the market close.

Rex Energy Corp. launched an offering of $125 million of perpetual convertible preferred stock that was expected to price before the market open on Wednesday, and AOL Inc. launched an offering of $300 million of five-year convertible senior notes after the close that was expected to price after the market close on Wednesday.

Sources said Ligand Pharmaceuticals Inc.’s $225 million of five-year convertibles, expected to price late Tuesday, looked pretty cheap. But vol. sensitivity shifted valuation depending on the chosen input. Using a 45% vol., the deal looked 3.5% cheap, but using 40% vol., the deal looked 0.8% cheap, a Connecticut-based source said.

EnerNOC Inc.’s $130 million of five-year convertible senior notes were also seen to be cheap. The deal was talked to yield 2% to 2.5% with a premium of 32.5% to 37.5%. An earlier story on EnerNOC that appeared in Monday’s Prospect News Convertibles Daily newsletter misreported the coupon talk.

After the market close, Apollo Commercial Real Estate Finance Inc. announced that it priced a $100 million add-on to its 5.5% five-year convertible senior notes at 102% of par.

Back in established issues, Nuance Communications Inc.’s convertibles traded actively after the Burlington, Mass.-based speech-recognition software company reported disappointing earnings that sent its shares lower by 9% and also called the older Nuance 2.75% convertibles due 2027, which become callable Aug. 20.

The older bonds traded just north of par and were expected to be taken out at par either through a put Aug. 15 or when called Aug. 20.

The new bonds “came in a little,” a trader said, trading last at 99, but they looked attractive on a yield basis, a second trader said.

Meanwhile Dendreon Corp.’s convertibles dropped several points to the mid 60 context as shares of the Seattle-based biopharmaceutical company tumbled 34% to $1.40 after the company reported quarterly results and warned of default risk.

The Dendreon 2.875% convertibles closed at 64 bid, 67 offered, which was down from 67 bid, 69 offered previously, a trader said.

“The bonds outperformed the stock by a large margin,” the trader said.

The convertibles of Electronic Arts Inc. were seen 0.5 point better as the company announces a new business plan, and the Yandex NV convertibles were a point lower as Russian names fall out of favor, a New York-based trader said.

Equities ended slightly lower, snapping a two-day winning streak.

New Aegerion flat to better

Aegerion’s newly priced 2% convertibles due 2019 traded at 99.5 bid, 100 offered near the end of the session, with the underlying shares down 55 cents, or 1.8%, at $30.26.

Earlier, the paper had been 100.5 bid, 101 offered on an outright basis with the underlying shares down about 0.8% at $30.26.

They were also seen earlier on swap at 100.75 bid, 101.25 offered.

The bonds were seen trading in line or up 0.5 point on a dollar-neutral, or hedged, basis, depending on one’s delta.

On swap, the bonds were better by 0.5 point on a 50% delta, a syndicate source said.

“The stock didn’t cooperate,” the syndicate source said.

The stock closed down 54 cents, or 1.8%, at $29.96.

The Cambridge, Mass.-based biopharmaceutical company that develops therapies for rare diseases priced an upsized $300 million of five-year convertible senior notes at par to yield 2% with an initial conversion premium of 35%.

Pricing of the Rule 144A deal came at the rich end of talk, which was for a 2% to 2.5% coupon and a 30% to 35% premium.

The greenshoe was upsized to $45 million from $37.5 million. Jefferies & Co. and J.P. Morgan Securities LLC were the joint bookrunners.

The notes are non-callable and will be settled in shares. They have dividend and takeover protection.

In connection with the offering, Aegerion entered into privately negotiated convertible note hedge and warrant transactions with one or more of the initial purchasers of the notes.

Proceeds will be used for working capital and other general corporate purposes, including funding possible acquisitions or investments, and to repurchase up to $35 million of outstanding common stock from certain purchasers of the notes.

Ligand to price

Ligand’s planned $225 million of five-year convertibles were talked to yield 0.5% to 1% with an initial conversion premium of 32.5% to 37.5%.

The Rule 144A offering has a $20 million greenshoe and was being sold via joint bookrunners BofA Merrill Lynch and Deutsche Bank Securities Inc.

The company has also authorized a $200 million share repurchase program over the next 12 months.

Proceeds of the bond issue will be used to repurchase up to $45 million of shares of common stock concurrently with the bond offering, with remaining proceeds for additional share repurchases of up to a total of $200 million. Proceeds will also be used to fund the net cost of a call spread, or convertible note hedge and warrant transactions that are also planned in connection with the deal.

The notes are non-callable with no puts.

San Diego, Calif.-based Ligand is a biopharmaceutical company.

Nuance trades

The older Nuance convertibles were trading on the back of the company’s call, a New York-based trader said. The out-of-the-money convertibles were not expected to be converted into shares as that would represent a loss of 7 points of premium, a New York-based trader said.

The new Nuance 2.75% convertibles due 2031 traded at 98.5 and were seen at 99 last. They are callable in 2017.

The new bonds moved slightly lower with the stock but trade close to a bond floor of about 95.5.

They have a 4-point premium to the bond floor, a trader said, citing a 300 basis points credit spread for the bond to get the 95.5 level.

Nuance shares fell $1.63, or 4 9%, to $16.47 on Tuesday.

The Nuance 2.75% convertible due 2027 is a $250 million issue that priced in 2007 and was seen trading just north of par. They convertibles are out-of-the-money with a strike at $19.00 and change.

The new Nuance is a $690 million issue priced in late 2011.

“They were both active today,” a New York-based trader said.

Rex Energy to price

Rex Energy, a State College, Pa.-based exploration and production company, launched an overnight deal of $125 million of perpetual convertible preferred stock. The deal was expected to price at a dividend of 5.5% to 6% with an initial conversion premium of 25% to 30%, according to a market source.

The registered deal has greenshoe of $18.75 million and was being sold via RBC Capital Markets LLC.

The preferred shares are non-callable for five-years and then provisionally callable subject to shares exceeding 130% of the conversion price.

Proceeds are earmarked to fund the company’s Appalachian Basin acreage acquisition from SWEPI LP, an affiliate of Royal Dutch Shell plc, with the remainder of proceeds to fund capital expenditures and for general corporate purposes.

AOL to price

AOL plans to price $300 million of five-year convertible senior notes at a 0.625% to 1.125% coupon and a 32.5% to 37.5% premium.

The Rule 144A offering has a $45 million greenshoe and was being sold via Goldman Sachs & Co. and J.P. Morgan Securities LLC.

In connection with the offering of notes, AOL plans to enter into privately negotiated convertible note hedge and warrant transactions, or a call spread.

Proceeds from the offering will be used to fund the net cost of the call spread as well as to fund the repurchase of up to $50 million of common shares as part of a previously announced $150 million share repurchase program.

Remaining proceeds will be for general corporate purposes, which may include share repurchases, acquisitions, and other strategic transactions and working capital.

New York-based AOL is a digital brands, products and services company.

Mentioned in this article:

Aegerion Pharmaceuticals Inc. Nasdaq: AEGR

AOL Inc. NYSE: AOL

Apollo Commercial Real Estate Finance Inc. NYSE: ARI

Dendreon Corp. Nasdaq: DNDN

Electronic Arts Inc. NYSE: EA

EnerNOC Inc. Nasdaq: ENOC

Ligand Pharmaceuticals Inc. Nasdaq: LGND

Nuance Communications Inc. Nasdaq: NUAN

Rex Energy Corp. Nasdaq: REXX

Yandex NV Nasdaq: YNDX

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