Teva launches quick-sale $375 million converts at 0.375-0.625%, up 18-22%

By Ronda Fears

Nashville, Nov. 12 - Teva Pharmaceutical Industries Ltd. launched $375 million of 20-year convertible notes talked to price at a yield of 0.375% to 0.625% with an 18% to 22% initial conversion premium. It is set to price early Wednesday.

Lehman Brothers is bookrunning lead manager, with Salomon Smith Barney as co-manager.

Traders quoted the new deal at issue to bid 0.25 point over par.

"It's not as cheap as we'd like but the market is really starved for new paper so it will fly, I'm sure," said a buyside trader.

The trader said the deal modeled out 1.25% cheap at the midpoint of guidance, using a credit spread of 200 basis points over Treasuries and 30% volatility.

Analysts at Deutsche Bank Securities Inc. put it 2.15% cheap, using a spread of 160 basis points over Libor and 30% volatility. The analysts noted that asset swaps on Teva were at that spread level after the deal was launched.

Bear Stearns & Co. analysts put it 0.7% cheap using a spread of 225 basis points over Treasuries and 30% volatility.

A sellside shop associated with the deal put it 0.5% cheap using a spread of 240 basis points over Treasuries and 30% volatility.

Teva shares closed up 70c to $72.71 as the deal was not launched until after the close.

The new convert will rank equally with Teva's other two converts, which also closed higher on the day.

Teva's 0.75% convertible due 2021 was quoted up 0.75 point to 106.125 bid, 107.125 asked and the 1.5% convertible due 2006 up 1.5 points to 108.125 bid, 108.875 asked.

The new 20-year paper will be non-callable for five years, with puts in years five, 10 and 15.

About two weeks ago, Teva said it is comfortable with its previous earnings projection of 88c to 93c a share for fourth quarter. That is well above the 76c a share consensus by First Call analysts.

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