Molycorp jumps on debut, but Integra drops; new Brookside extends losses; Vertex expands

By Rebecca Melvin

New York, June 10 - Two new issues in the convertible bond market - both $200 million issues of five-year paper - moved in opposite directions Friday in secondary dealings as persistent selling in equity markets weighed on convertibles overall.

Molycorp Inc.'s newly priced 3.25% convertibles due 2016 traded up to as high as 105.75 with the underlying shares higher by as much as 3% after the Colorado-based maker of rare earth oxides priced $200 million of the five-year convertibles late Thursday at the mid- to rich-end of talk. The new Molycorp convertibles closed at 104.625 versus a $51.20 closing share price, according to a syndicate source.

But Integra LifeSciences Holdings Corp.'s newly priced 1.625% convertibles slipped below par to about 99.5 out of the chute. They traded "wrapped around par" for a portion of the day, and closed at 98.75 versus as share price of $45.65 at the close. The shares were down 2% on the day.

The Plainsboro, N.J.-based life sciences company priced $200 million of 5.5-year convertible senior notes late Thursday toward the cheap end of talk.

"The stock took a hit; the whole medical device sector is down," a syndicate source said of the Integra deal.

Brookdale Senior Living Inc.'s 2.75% convertibles extended losses on their second day in the secondary market, sinking with their underlying shares. The Brentwood, Tenn.-based senior living facilities' operator priced $275 million of seven-year convertible notes late Wednesday.

Elsewhere, Vertex Pharmaceuticals Inc.'s convertibles were lower outright but again improved on a hedged basis for a second consecutive session after the Cambridge, Mass.-based biotechnology company released disappointing phase 2 data on a combination of drugs to treat cystic fibrosis.

Equities opened lower again on Friday, and remained lower for the entire session, with the Dow Jones Industrial Average dropping below 12,000 for the first time since March. The Standard & Poor's 500-stock index shed 18, or 1.4%, to 1,270. The broad index has notched six weeks of declines, the longest losing streak since 2008.

Molycorp jumps on debut

The newly priced Molycorp 3.25% convertibles due 2016 traded up to 105 to 105.5 early in the session, and to as high as 105.75, but were also seen lower as shares bounced around.

"The stock has been all over the place," a syndicate source said, citing the new paper at midsession at 105 versus a share price of $52.30.

Shares of the Greenwood, Colo.-based producer of rare earth oxides ended at $51.49, which was up 0.3%, on the day in heavy volume.

The new deal priced at par to yield 3.25% with an initial conversion premium of 40%. It was purchased initially by a mix of hedged and outright players, according to the syndicate source.

The Rule 144A offering priced at the midpoint of revised coupon talk, which was 3% to 3.5%, and at the rich end of revised initial conversion premium talk, which was 37.5% to 40%.

Molycorp also priced a concurrent secondary offering of 10 million shares of common stock at $51.00 per share. J.P. Morgan Securities LLC and Morgan Stanley & Co. Inc. were the joint bookrunners of both the convertibles and stock.

The convertibles have a $30 million greenshoe.

The convertibles will be non-callable with no puts, and there is takeover and dividend protection. They have contingent conversion subject to 130% price hurdle.

Proceeds are earmarked to fund production capacity and expansion at the company's Mountain Pass, Calif., processing facility and for general corporate purposes.

Integra edges lower on debut

Integra's newly priced 1.625% convertibles due 2016 traded out of the gate at 99.5 bid, 100 offered versus a share price of $46.70, according to a New York-based sellsider.

Later the notes were quoted around 100 versus a share price of $46.70. And they closed at 98.75 versus a share price of $45.61, which was down 2.3%.

"They are more boring than an arthouse movie," a New York-based trader said.

Another second trader said the paper was "wrapped around par."

Integra priced $200 million of the 5.5-year convertible senior notes due December 2015 at par to yield 1.625% with an initial conversion premium of 23%, according to a syndicate source.

The Rule 144A deal, which came toward the cheap end of talk, also came with a call spread that was allocated to four banks, including RBC Capital Markets and RBS Global Banking & Markets.

The deal, which has a $30 million greenshoe, was sold via joint bookrunners JPMorgan, Morgan Stanley, Bank of America Merrill Lynch, Deutsche Bank Securities Inc., Wells Fargo Securities LLC and RBC Capital Markets LLC.

The convertibles are non-callable and have contingent conversion subject to a 150% price hurdle. There is also takeover protection.

The company makes and markets surgical implants and medical instruments for neurosurgery, extremity reconstruction and orthopedics.

Vertex gains on hedge

Vertex's 3.35% convertibles due 2015 traded at 121.75 versus a share price of $48.05 on Friday.

"That's about 0.5 point higher versus the open," a New York-based sellside analyst said.

On Thursday the paper was 120.55, and a week ago, the Vertex 3.35% convertibles were 129 versus a share price of $54.50.

"That was 17.5 points," an analyst said about last week's price. "Now they're about 22.5 points."

Shares of the Cambridge, Mass.-based biotechnology company eked out a close in positive territory after dropping 10% Thursday on the disappointing phase 2 data.

Brookdale extends drop

Brookdale's 2.75% convertibles due 2018 traded down to 97.25 and also at 98 versus a share price of $22.50 on Friday.

"It doesn't look like it ever traded north of par, having traded 99.5 bid, 99.75 offered right out of the gate," a New York-based sellside desk analyst said.

On their debut Thursday, Brookdale closed out at 99.25 bid, 99.5 offered versus an underlying share price $23.00.

The registered offering came at the cheap end of talk, which was for a coupon of 2.25% to 2.75% and a 27.5% to 32.5% initial conversion premium.

There is a $41.25 million over-allotment option for the deal, which was sold via joint bookrunners Bank of America Merrill Lynch, JPMorgan and RBC Capital Markets. Co-managers were CSCA Capital Advisors LLC and Stifel, Nicolaus & Co. Inc.

Mentioned in this article:

Brookdale Senior Living Inc. NYSE: BKD

Integra LifeSciences Holdings Corp. Nasdaq: IART

Molycorp Inc. NYSE: MCP

Vertex Pharmaceuticals Inc. Nasdaq: VRTX

© 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.