New Teleflex moves up in active trade; Transocean convertibles gain; Leap Wireless steady

By Rebecca Melvin

New York, Aug. 4 - Teleflex Inc.'s newly priced 3.875% convertibles traded up to 101.5 bid late in the session Wednesday after pricing late Tuesday. Trading action in the name was brisk, with Trace data reporting the new paper as the day's most active issue.

According to Trace, $169 million of the Teleflex bonds changed hands, a New York-based sellside analyst said.

All three sister issues of Transocean Ltd. were better ahead of the oilfield-services company reporting quarterly earnings after the close of markets and amid positive comments about the Gulf of Mexico oil spill made by president Barack Obama.

Elsewhere, Leap Wireless International Inc.'s wider-than-expected quarterly loss sent the digital wireless services provider's shares down sharply, but the convertibles held steady. The company's general credit wasn't seen as being affected by the results, a New York-based sellside analyst said.

Overall the convertibles market "felt better," with credit seen better in general, a Connecticut-based sellside trader said.

A New York-based convertibles analyst said the market tone was slightly better with the equity market's strengthening mode being one factor, but also more high-yield market new issuance being another important factor.

"Players in convert land are involved in higher yield, credit names, and plays that are credit quality focused, so more high-yield activity has perked things up," the analyst said.

New Teleflex adds

Teleflex's newly priced 3.875% convertibles due 2017 traded mostly between 101.25 bid, 101.75 offered on Wednesday, with the new paper seen last at 101.5 bid, market sources said.

Shares of the Limerick, Pa.-based provider of single-use medical devices and surgical products traded up 67 cents, or 1.3%, to $53.99 in extra heavy volume.

"I think they will steadily improve on swap," a Connecticut-based sellsider said of the new Teleflex bonds.

Teleflex, a newcomer to the convertibles market, priced $350 million of seven-year convertibles as planned after the close Tuesday via bookrunners Goldman Sachs & Co., Jefferies & Co., Morgan Stanley & Co. Inc., Bank of America Merrill Lynch and J.P. Morgan Securities Inc.

The registered deal priced toward the cheap end of coupon talk, which was 3.5% to 4%, and at the cheap end of premium talk, which was 15% to 20%.

At the midpoint of talk, the Teleflex paper was seen about 1.25 points cheap, using a credit spread of 650 bps over Libor, 25% volatility and 50 bps of borrow.

A second sellsider said that his spread on the name was tighter and his vol. assumption was larger, and he saw the bonds at fair value at about 102.5.

Teleflex entered into privately negotiated convertible note hedge and warrant transactions concurrently with the convertibles deal.

The strike price of the warrant transactions is $74.648, which represents a 40% premium from the issuer's perspective over the Aug. 3 closing stock.

The Teleflex convertible offering is being made as part of a refinancing package that includes amending certain terms of Teleflex's senior secured credit facilities from 2012 to 2014, repaying $200 million under the senior secured credit facilities, and prepaying Teleflex's $196.6 million outstanding of senior notes issued in 2007 and maturing in 2012 and 2014.

Transocean convertibles better

All the Transocean convertibles were better Wednesday, a Connecticut-based trader said.

Transocean's 1.625% series A convertibles due 2037 traded at 98.625, compared to about 97.7 on Tuesday.

Transocean's 1.5% series B convertibles due 2037 traded at 93.75, compared to about 92.3 on Tuesday.

Transocean's 1.5% series C convertibles due 2037 traded at 89.75, up about 2 points compared to 87.7 on Tuesday.

Shares of the Vernier, Switzerland-based offshore drilling contractor gained $3.17, or 6.3%, to $53.56 on Wednesday.

Together about $98 million of the two Transocean 1.5% convertibles changed hands during the session, according to Trace data.

During the day, president Obama said that the end is in sight for the Gulf oil spill crisis as efforts to stop the leak appear to be working. The word buoyed shares of Transocean and another company affected by the leak, Anadarko Corp.

Transocean lost its Deepwater Horizon rig in the BP plc oil well explosion in April that resulted in an uncontrollable flow of oil from the bottom of the ocean that sullied beaches in five Gulf states and harmed other parts of the environment.

After the close, Transocean reported a second-quarter drop in profit that was larger than expected, and the company's shares lost ground in after-hours trade.

Transocean's second-quarter net profit fell to $715 million, or $2.22 per share, from $806 million, or $2.49 per share, a year earlier.

There was an after-tax cost of $69 million associated with the well blow-out. The profit figure also includes a $267 million gain on insurance recoveries for the lost rig.

Transocean's adjusted profit was $1.44 per share, compared to the $1.68 per share that analysts had expected.

Revenue fell 13% to $2.5 billion.

Leap mostly steady

Leap's 4.5% convertibles due 2014 were seen late in the day at 86.5, a Connecticut-based sellsider said. And Trace data reported that the convertibles had traded as low as 86 on Wednesday, which was down only 0.875 of a point from previous levels.

On the contrary, shares of the San Diego-based wireless services provider skidded $1.64, or 14%, to $9.92 in heavy volume.

The action today was "event based," and "not a credit issue," a sellside analyst said. "The credit in this name is not too bad, and today was more of a hedge adjusting day."

After the close of markets on Tuesday, Leap said it posted a net loss of $19.3 million, or 24 cents a share, compared with $61.2 million, or 89 cents a share, a year ago. Analysts had expected a second-quarter loss of 23 cents a share.

Revenue rose 6% to $633.5 million, but analysts had expected revenue would be higher at $671.8 million.

Leap also said it lost a net 112,000 customers in the second quarter, which was also contrary to what analysts had expected.

In response, the company unveiled a plan aimed to help stem losses that involves launching more smartphones and renting network space from bigger rival Sprint Nextel so it could offer nationwide wireless services. It also is adjusting its service pricing.

Later this year, the company plans to change its corporate name from Leap Wireless to Cricket.

Mentioned in this article:

Leap Wireless International Inc. Nasdaq: LEAP

Teleflex Inc. NYSE: TFX

Transocean Ltd. NYSE: RIG

© 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.