New Navistar slips on debut; Tower Group drops again; planned BioMarin adds in the gray

By Rebecca Melvin

New York, Oct. 8 - Navistar International Corp.'s newly priced 4.5% convertibles traded flat to lower on their debut in the secondary market on Tuesday after $200 million of the five-year convertible bonds priced at a discounted 99.5 and at the cheap end of talked terms.

Navistar's existing 3% convertibles due 2014 traded initially little changed at 103ish versus a share price of $36.50, according to a New York-based trader. Later they were seen changing hands at 102.

Tower Group International Ltd.'s convertibles slid again, resuming a roller coaster that the notes have been on for more than a week. Investors remain concerned following news from the ailing Bermuda-based reinsurance company that it is "reviewing strategic options" after $365 million had to be added to reserves and the company took a $215 million goodwill impairment related to its commercial, specialty and reinsurance segments.

Last week, the Tower convertibles had dropped amid concerns that the company might be forced into a reorganization in the face of its reserve crisis, but then the paper recouped all of those losses in the face of reinsurance agreements inked to buoy the company.

Talk was revised on the planned BioMarin Pharmaceutical Inc. dual-tranche deal for $600 million, and even after the revisions which tightened pricing, the paper was bid higher in the gray market ahead of final terms seen being fixed after the market close Tuesday.

NQ Mobile Inc., a Beijing- and Dallas-based mobile internet services company, which was expected to price $150 million after the market close, was said to have limited to no stock borrow, so the deal, which carries a spread of 1,000 basis points over Libor, according to one trader, was seen as a pure equity play.

NQ shares slid in trading Tuesday, ending down $1.22, or nearly 6%, to $19.70.

Equities slid as uncertainty grew surrounding the U.S. budget talks and debt ceiling, and the partial shutdown of the U.S. government stretched further into its second week.

The Dow Jones industrial average fell 159.71 points, or 1.1%, to 14,776.53; the S&P 500 stock index lost 20.67 points, or 1.3%, to 1,655.45; and the Nasdaq stock market fell 75.54 points, or 2%, to 3,694.83.

New Navistar slips

Navistar's new 4.5% convertibles due 2018 were seen at 99 bid, 99.5 offered versus an opening share price of $36.50. Later they traded at 99.

Shares of the Lisle, Ill.-based truck, bus, military vehicle and engine maker held fairly steady in early trade and then dropped sharply lower, ending down $1.48, or 4%, to $35.02.

The paper priced as per initial talk at a discount of 99.5 and at the cheap end of talked terms, which were for a 4% to 4.5% coupon and a 60% to 65% initial conversion premium.

At the midpoint of terms they were seen rich, according to traders ahead of pricing.

Proceeds will be used, together with $270 million of intercompany borrowings, for general corporate purposes, including funding capital expenditures and repurchasing some of the existing 3% convertibles in open market and privately negotiated transactions.

Navistar's existing 3% convertibles due October 2014 traded flattish to start at about 103 and were later seen at 102.

BioMarin adds in gray

Even though price talk on BioMarin's planned $600 million of convertible senior notes was tightened during marketing, the two tranches were bid higher in the gray market ahead of final terms expected to be fixed after the market close Tuesday.

The five-year tranche for $300 million was seen at 102.75 bid, 103.75 offered in the gray market.

The seven-year tranche, also for $300 million, was seen at 102.5 bid, 103.5 offered, according to a Connecticut-based trader.

The shorter-dated notes saw price talk revised to a 0.75% fixed coupon and a 37.5% to 40% initial conversion premium, compared to initial talk at a 0.75% to 1.25% coupon and a 32.5% to 37.5% premium, according to a syndicate source.

The seven-year tranche for $300 million was now expected to price with a 1.5% fixed coupon and a 37.5% to 40% initial conversion premium, compared to initial talk of a 1.5% to 2% coupon and a 32.5% to 37.5% premium.

Shares of the Novato, Calif.-based biopharmaceutical company, which focuses on therapeutic enzyme products, fell $5.08, or 7%, to $67.25 on Tuesday.

As previously reported, both $300 million tranches have a $35 million greenshoe and were being sold in a registered offering via bookrunners BofA Merrill Lynch, Goldman Sachs & Co., J.P Morgan Securities LLC and Morgan Stanley & Co. LLC. Barclays is a co-manager.

The senior subordinated notes are non-callable for life with no puts. They have contingent conversion if shares exceed 130% of the conversion price, and they have net share settlement, as well as takeover and dividend protection.

Tower takes another tumble

Tower Group's 5% convertibles due 2014 fell again, trading as low as 83 in the early going in smaller, odd-lot trades, and seen after that in the context of 87.5 bid, 89 offered, according to a Connecticut-based trader.

That was down from about 95 to 96, the level to which it recovered after a similarly sized slump last week.

The latest tumble came on news that the ailing Bermuda-based property and casualty insurance and reinsurance company said it is reviewing strategic options after $365 million had to be added to reserves and after taking a $215 million impairment of goodwill tied to its commercial, specialty and reinsurance segments.

Tower shares fell a whopping $3.02, or 41%, to $4.39.

The company's review will include reserves for coverage including workers' compensation and commercial auto policies from 2009 to 2011. Full second-quarter results will be disclosed with the evaluation is complete.

Fitch Ratings cut Tower's rating to B from BBB, citing its materially damaged competitive position, which negatively impacts the company's financial flexibility and ability to write new business.

Last week, the stock and convertibles recovered after the company announced it inked three agreements with reinsurers aimed at relieving its financial constraints for the time being.

The company says it will report its delayed second-quarter financials soon.

Mentioned in this article:

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Navistar International Corp. NYSE: NAV

NQ Mobile Inc. NYSE: NQ

Tower Group International Ltd. Nasdaq: TWGP

© 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.