Coherent, Albany International launch new deals; Teva, General Motors gain on positive news

By Kenneth Lim

Boston, March 6 - New deals continued to roll in on Monday, with Coherent Inc. and Albany International Corp. announcing that they would price their fresh offerings on Tuesday.

Meanwhile, Teva Pharmaceutical Industries Ltd.'s 0.25% convertibles due 2026 gained slightly outright in the morning amid news that the company had received tentative approval from the Food and Drug Administration for a further strength of a generic anticonvulsant drug.

Genworth Financial Inc.'s 4.583% convertibles due 2008 were also active on Tuesday on the previous week's news that General Electric Co. had sold its remaining stake of 71 million Class A shares at $32.75 apiece in a secondary offering.

Other names that traded on Monday include chip maker Intel Corp.'s 2.95% convertibles due 2035, which were seen changing hands about half a point better outright at 88.5 versus a stock price of $20.50, said a sell-side source. The securities were traded at 88 points against a $20 stock on Friday.

A major convertible trading desk marked the convertible at 88.54 bid, 88.67 offered versus Monday's closing stock price of $20.30. Intel stock (Nasdaq: INTC) ended the day two cents or 0.1% lower.

Santa Clara, Calif.-based Intel on Friday reduced its first-quarter revenue forecast to between $8.7 million and $9.1 billion from between $9.1 billion and $9.7 billion, and guided for lower gross margins.

Also in trading Monday, Sirius Satellite Radio Inc.'s 3.25% convertible due 2011 gained slightly against the stock, rising to 118.50 versus the $5.05 stock. It was marked at 117.5 bid, 118 offered versus $4.91 at the close. The stock was 2%, or 10 cents, lower on Monday. New York-based Sirius (Nasdaq: SIRI) is a satellite radio broadcaster.

General Motors Corp.'s three convertibles also rose on Monday after the Detroit auto maker said it was selling back most of its stake in Suzuki Motor Corp. to the Japanese car maker. The sale, which would leave General Motors with a 3% interest in Suzuki, would give General Motors about $2 billion in cash.

General Motors' 4.5% convertibles due 2023 (NYSE: GXM) rose to 22.84 on Monday, up 0.23 point or 1.02%. The 5.25% convertibles due 2032 (NYSE: GBM) closed at 15.17, higher by 0.06 point or 0.4%. The 6.25% convertibles due 2033 (NYSE: GPM) gained 0.21 point, or 1.29%, to end at 16.51. General Motors stock (NYSE: GM) gained 60 cents, or 3.12% over the day to close at $19.81.

Coherent launches $175 million deal

Santa Clara, Calif.-based Coherent Inc. said Monday that it plans to offer $175 million of five-year convertible bonds, and market sources say price talk guides for a coupon between 2.5% and 3% and an initial conversion premium between 27.5% and 32.5%.

The securities will be priced at par and the final terms are expected to be set on Tuesday, March 7.

Bookrunner Merrill Lynch has a greenshoe option of $25 million. The bonds will be distributed under Rule 144A.

A sell-side analyst said the word on the Street is that the underwriters are pricing the securities using a credit spread of "350 [bps] over swaps at 30% vol [volatility]."

"That's somewhat in line with what I think," the analyst said. "Usually underwriters are a bit aggressive when they price, but I think this is fair."

He said he was waiting to see how the stock performs on Tuesday before drawing a conclusion on the final valuation, but noted that the "stock's getting hit today [Monday]."

Coherent (Nasdaq: COHR) closed at $30.50, down $2.25 or 6.87%.

Despite Monday's activity in the name, the stock is usually lightly traded and that could dull its attractiveness for some investors, the analyst noted. Average daily volume in the past three months was just 188,642 shares.

"The stock's pretty illiquid, that's going to be a problem for swap guys because they don't have the volume," the analyst said.

Coherent designs and makes lasers and precision optics that are used in areas such as semiconductor manufacturing and environmental research. Proceeds from the deal will be used to partly fund its planned acquisition of East Setauket, N.Y.-based Excel Technology Inc.

Coherent on Feb. 21 said that it was buying Excel for $376 million in cash, paying $30 per Excel share, or 5.9% above the target company's stock price at that time. The acquisition is expected to close in the June quarter.

Albany to offer $150 million deal

Albany International is also offering $150 million of 20-year convertible notes talked to yield between 1.75% and 2.25% with an initial conversion premium between 20% and 25%, market sources said.

The securities will mature on March 1, 2026 and will be priced at par.

Bookrunners JP Morgan and Banc of America have a 13-day greenshoe option of $30 million.

Albany stock (NYSE: AIN) closed at $37.12 on Monday, down 0.88% or 33 cents.

The Rule 144A deal will have a contingent conversion feature that will be triggered when the parity of the bond exceeds 103.

Albany, N.Y.-based Albany International said will use proceeds from the offering to repurchase the rest of the 3.5 million of its class A common stock is has not already bought. The company, which announced the share buyback in January, has already repurchased 663,700 shares.

The company will also enter into convertible note hedge and warrant transactions that will give it the option to buy shares and reduce the potential dilution from the conversion of the notes.

Albany International makes consumable parts for paper-making machines and industrial doors.

Teva gains on FDA nod

Teva Pharmaceutical's 0.25% convertibles due 2026 were up about half a point outright on Monday morning when the company announced a tentative approval from the Food and Drug Administration for a particular strength of the generic anticonvulsant drug Topiramate.

The securities were traded at 102 versus a stock price of $43.50. But Teva Pharmaceutical stock (Nasdaq: TEVA) fell the rest of the day, and ended at $41.45, 31 cents or 0.74% below the previous session. At the closing price, the 0.25% convertible was marked at 101.1 bid, 101.6 offered.

Teva's 0.5% convertible due 2024 was marked at 115.85 bid, 116.1 offered versus Monday's closing stock price. Against the same stock price, the 1.75% convertible due 2026 was at 100.44 bid, 100.94 offered.

Teva said it had gotten a tentative OK from the FDA for the 50 milligram-strength Topiramate tablet, which is a generic version of Ortho McNeil's Topamax tablets. Teva already has tentative approvals for strengths of 25 mg, 100 mg and 200 mg. Topamax's patent expires in September 2008.

Despite the interest in the name on Monday, a convertible analyst who covers the biotech sector said he did not think the tentative FDA approval was significant.

"None of the sales will kick in until 2009, so it's not clear yet what the impact will be," the analyst said. "It's still quite far out."

He added, "And it's an anti-convulsant drug, I don't think it's a very big market."

Teva is an Israel-based generic drug maker.

Genworth active on GE sale

A sell-side source said he saw "a lot" of Genworth's 4.583% convertibles trade "ahead of the [General Electric] secondary [offering]", with prices at 32 versus a stock of $33 in the afternoon.

General Electric said on Thursday last week that it was selling its entire stake in the insurance holding company that could reap General Electric about $2.8 billion in proceeds. As part of the sale, 71 million class A shares of Genworth will be sold through bookrunners Merrill Lynch, Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley in a secondary offering at $32.75 a share. Genworth is also buying back 15 million of its own class B shares from General Electric for $479 million.

Shares of Richmond, Va.-based Genworth (NYSE: GNW) closed at $33.52 on Monday, up 32 cents or 0.96%.

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