BioMarin tranches gain in active debut; new NQ slips outright; Tower sheds another point

By Rebecca Melvin

New York, Oct. 9 - BioMarin Pharmaceutical Inc.'s newly priced tranches of five- and seven-year convertible senior subordinated notes were bid sharply higher in early action Wednesday and then pulled back to trade in the 103 to 104 context with the underlying shares lower by about 3%, market players said.

Both tranches, including the BioMarin 0.75% convertibles due 2018 and the BioMarin 1.5% convertibles due 2020, were seen initially at 106.5 bid.

BioMarin priced an upsized $680 million of the convertibles in two, $340 million tranches at the tight end of revised talk, and they were the most actively traded names in the convertibles secondary market.

NQ Mobile Inc.'s newly priced 4% convertibles opened flat to higher on their debut in the secondary market but closed below par amid a slide in the underlying American Depositary Shares after $150 million of the five-year convertible bonds priced at the rich end of coupon talk and at the cheap end of premium talk.

Elsewhere, Tower Group International Ltd.'s convertibles dropped another point in trade, extending losses related to news that the ailing Bermuda-based reinsurance company 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.

Alcoa Inc.'s 5.25% convertibles due 2014 were looking stronger and the shares closed up 2% after the New York-based aluminum maker swung to a profit that was better than expected for its third quarter.

Meanwhile, after the market close, Ctrip.com International Ltd. launched a big offering of up to $500 million five-year convertible senior notes that was seen pricing after the market close Thursday and was talked to yield 1.25% to 1.75% with an initial conversion premium of 37.5% to 42.5%.

Equities ended mixed amid ongoing uncertainty around U.S. budget talks and the debt ceiling as the partial shutdown of the U.S. government continued.

In news Wednesday, president Barack Obama announced his nomination of Janet Yellen to be the next chair of the Federal Reserve Board, replacing Ben Bernanke.

And the Federal Reserve released its minutes from the September policy meeting, revealing ongoing concern among officials about scaling back stimulus when the U.S. economy's recovery remained tepid. But the officials still appeared hopeful that they could begin to taper its $85-billion-per month bond-buying program by the end of the year.

The Dow Jones industrial average edged up 26.45 points, or 0.2%, to 14,802.98, and the S&P 500 stock index picked up 0.95 point to 1,656.40; but the Nasdaq stock market fell 17.06 points, or 0.5%, to 3,677.78.

BioMarin jumps on debut

BioMarin's 0.75% convertibles due 2018, or A tranche, finished their debut session in the secondary market at 103.5 bid, 104.25 offered with the underlying share at $65.00, according to a syndicate source.

The BioMarin 1.5% convertibles due 2020, or the B tranche, ended at 103.375 bid, 104.125 offered versus the same closing share price of $65.00.

It wasn't known how the paper did on a dollar-neutral, or hedged, basis, but the underlying shares ended down $2.25, or 3.4%, on the day, while the bonds gained.

Both new BioMarin tranches were initially seen at 106.5 bid, however, and then they pulled back to 103, according to one trader. A second trader said they were 104 bid, 104.5 offered by late morning.

There shorter-dated issue is about 0.25 point cheaper and was more actively traded than the longer-dated issue. But in the gray market, the shorter-dated issue was about 0.25 point more expensive.

The bonds were seen at 102 to 103 plus in the gray market ahead of final terms being fixed late Tuesday.

About the pullback, one trader said, "106.5 was crazy. When people got their allocations, they sold into it."

A syndicate source said, "Outrights were throwing elbows to get paper after a huge book came together for us yesterday."

BioMarin priced an upsized $680 million at the tight end of revised talk. Initially the base deal was expected to be $600 million in size. The $70 million greenshoe of additional bonds initially talked still stands.

The five-year tranche for $340 million has a 0.75% coupon, which was fixed during marketing from an initially talked 0.75% to 1.25% coupon.

The seven-year tranche for $340 million has a 1.5% coupon, which was fixed during marketing from an initially talked 1.5% to 2% coupon.

Both tranches have a 40% initial conversion premium, which was the rich end of 37.5% to 40% talk, tightened during marketing from 32.5% to 37.5%.

BofA Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were the joint bookrunners of the registered offering. Barclays was a co-manager.

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

About $27 million of the proceeds will be used to cover the cost of capped call transactions pertaining to about 50% of the notes.

Remaining proceeds will be used for general corporate purposes, including working capital and research and development.

The strike on the capped call transactions is $121.05, which raises the initial conversion premium from the issuer's perspective to 80%.

BioMarin is a Novato, Calif.-based biopharmaceutical company focused on therapeutic enzyme products.

New NQ Mobile quiet

NQ Mobile's new 4% convertibles due 2018 ended the session at 98.5 bid, 99.5 offered after opening at 100 bid, 100.5 offered, syndicate sources said.

The notes traded on an outright basis.

Nevertheless weaker underlying shares were a weight, although they pared losses into the close. The American Depositary Shares of the NQ convertibles ended down 80 cents, or 4%, at $18.90. In the early going the shares were down 7%.

NQ Mobile priced $150 million of five-year convertible senior notes at par to yield 4% with an initial conversion premium of 30%, according to a syndicate source.

The Rule 144A notes priced at the cheap end of 3.5% to 4% coupon talk and at the rich end of 25% to 30% premium talk.

The deal has a $22.5 million greenshoe and was sold via Morgan Stanley & Co. International plc and Deutsche Bank Securities Inc.

The notes are non-callable until Oct. 20, 2016 and then provisionally callable if shares rise to 130% of the conversion price.

There is an investor put on Oct. 15, 2016. Settlement will be for shares only. There is also takeover and dividend protection.

Proceeds are earmarked for general corporate purposes, including working capital needs and potential acquisitions of complementary businesses.

NQ is a provider of mobile internet services with dual headquarters in Dallas and Beijing.

Tower extends losses

Tower Group's 5% convertibles due 2014 dropped another point on Wednesday to about 86.5 bid, 88 offered from 87.5 bid, 89 offered on Tuesday, 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 another 66 cents, or 15%, to $3.75 on Wednesday, after dropping a whopping 41% Tuesday.

The company is still dealing with fallout from a reserve loss crisis, including looking at "strategic options."

Its review includes reserves for coverage including workers' compensation and commercial auto policies from 2009 to 2011. Full second-quarter results will be disclosed when the evaluation is complete.

Alcoa firmer

Alcoa's 5.25% convertibles due 2014 were seen at 129 to 130.5, which was up from 125 to 127, according to Trace data. Sources queried hadn't traded the name.

Alcoa shares added 16 cents, or 2%, to $8.10 on Wednesday.

Alcoa posted a third-quarter profit that reversed a year-earlier loss amid strong demand from automakers and better cost savings and despite lower aluminum prices.

Alcoa said last Tuesday that it earned $24 million, or 2 cents per share, in the most recent quarter, compared to a loss of $143 million, or 13 cents per share, in the year-earlier period.

Excluding restructuring and other one-time items, the company earned 11 cents per share, which was more than double the 5-cent-per-share profit that analysts forecast.

Revenue fell to $5.77 billion, which was down 1%, but better than the $5.64 billion analysts had expected.

Ctrip to price

Shanghai-based Ctrip.com, a travel services provider, launched an offering of up to $500 million of five-year convertible senior notes after the market close that was seen pricing after the market close Thursday. The securities were talked to yield 1.25% to 1.75% with an initial conversion premium of 37.5% to 42.5%, according to a market source.

The notes are being distributed under Rule 144A in the United States and to certain persons offshore under Regulation S.

There is a $75 million greenshoe for the deal, which was being sold via JPMorgan.

The notes are non-callable for life, but holders can put the bonds on Oct. 15, 2016. There is takeover protection.

Proceeds will be used for general corporate purposes, including working capital and potential acquisitions of complementary businesses as well as potential repurchases of ADS and note retirement. Proceeds will also be used to pay the cost of a convertible note hedge transaction.

Mentioned in this article:

Alcoa Inc. NYSE: AA

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Ctrip.com International Ltd. Nasdaq: CTRP

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.