Midday Commentary: Planned Resource Capital looks cheap; Savient files Chapter 11

By Rebecca Melvin

New York, Oct. 15 - Market players were beginning to size up a new deal a from Resource Capital Corp. that launched late Monday, with one trader seeing the deal looking cheap, with fair value at about 103 using a credit spread of 575 basis points over Libor and a 22% vol. at the midpoint of talked terms.

Resource Capital's $100 million of five-year convertibles was talked at a 5.75% to 6.25% coupon and a 10% to 15% initial conversion premium, with pricing expected after the market close Tuesday.

Meanwhile, traders were considering the recovery value of Savient Pharmaceuticals Inc.'s 4.75% convertibles due 2018 after the East Brunswick, N.J.-based specialty biopharmaceutical company filed for Chapter 11 bankruptcy overnight.

The bankrupt company has also entered into an acquisition agreement with Sloan Holdings CV, a subsidiary of US WorldMeds LLC, as a stalking horse bidder. Sloan will acquire substantially all of the assets of Savient, including all Krystexxa assets, for about $55 million, according to a company news release.

Meanwhile, MolyCorp Inc. looked poised to drop lower after the Greenwood Village, Colo.-based rare earths minerals miner said in a filing that it expects to run at negative cash flows and will have to raise additional capital. The company also announced that it will sell up to $200 million of common stock subject to market conditions.

MolyCorp's 3.25% convertibles due 2016 were bid at 66, according to a New York-based trader. That was down from a small-lot trade with a 75 handle on Oct. 10, the trader said. The issue is pretty illiquid.

The MolyCorp news was sending the company's securities in the opposite direction from earlier this month when they went up on news that its last major construction projects at the Mountain Pass, Calif., plant had been completed and the units were expected to be commissioned and begin production in the fourth quarter.

MolyCorp's 5.5% convertibles due 2018 and MolyCorp's 6% convertibles due 2017 were not heard in early action.

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