Teva contracts on swap; new Inphi adds 0.5 point; Pandora, Vitamin Shoppe deals look cheap

By Rebecca Melvin

New York, Dec. 3 – Teva Pharmaceutical Industries Ltd.’s newly priced 7% mandatory convertibles contracted on a swap basis on Thursday after the Petach Tikva, Israel-based pharmaceutical company priced $3.375 billion of the preferred shares at the midpoint of talk, market sources said.

The new Teva 7% mandatories were quoted at 100.125 bid, 100.375 offered in the early going by a New York-based trader.

The convertibles looked to have contracted by more than a point versus a share price of $64.00.

Also in the primary market, Inphi Corp.’s newly priced 1.125% convertibles opened around 100.25 bid, 100.5 offered after the Santa Clara, Calif.-based semiconductor company priced an upsized $200 million of the five-year bonds at the midpoint or near the midpoint of talk.

The Inphi deal closed slightly below par but was better on swap versus its underlying shares, which were down 70 cents, or 2.4% at $29.05.

On tap were two more deals pricing after the market close in a primary market that is cracking this week after a slump that left November with a pittance of issuance.

Ahead of pricing, Pandora Media Inc.’s $300 million of five-year convertible senior notes looked to be about 4.5 points cheap at the midpoint of talk using a credit spread of 500 basis points over Libor and 35% vol., a Connecticut-based trader said.

The Pandora bonds were talked at a 1.75% to 2.25% coupon and a 25% to 30% premium.

The Vitamin Shoppe’s $125 million offering of five-year convertible senior notes looked to be worth 101.25 at the midpoint of talk, using a credit spread of 500 bps over Libor and 32% vol., the trader said.

Teva contracts on swap

Teva’s newly price 7% mandatory convertible preferred shares were quoted around par on Thursday after $3.375 billion of the preferred shares priced. The deal had looked cheap ahead of pricing and was valued at fair value of 103.7, using a 2 skew and credit spread of 200 bps over Libor.

Meanwhile, Teva also priced $3.375 billion of American Depositary Shares concurrently with the preferred deal, and those common shares were up more than 2% in the early going, although they closed up only 0.7%, or 41 cents, at $63.53.

The size of the $6.75 billion capital raise hurt the mandatories, a New York-based trader said.

“The size is massive. There’s a bunch of stock circulating. It was more supply than the market could absorb in one eating,” the trader said.

A second trader said that the convertibles contracted about 1.375 points on a dollar-neutral, or swap, basis.

A third trader said that Teva was “trading terribly despite the favorable pricing of $62.50 in the common.”

The ADS deal priced slightly below the closing price of existing shares on the New York Stock Exchange.

Teva does not intend to list the mandatories.

Proceeds from the offerings will go toward the purchase of its previously announced acquisition of the Allergan plc generic pharmaceuticals business, for the pending acquisition of Rimsa and for general corporate purposes.

Joint bookrunners of the offerings are Barclays, BofA Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, BNP Paribas, Credit Suisse, HSBC, Mizuho Securities, RBC Capital Markets and SMBC Nikko.

Inphi adds on swap

Inphi’s new 1.125% convertibles due 2020 traded slightly above par in the early going on Thursday but closed below par at about 99.75, according to a market source.

The bonds slipped on an outright basis but on swap they were better by about 0.5 point, the source said.

Inphi shares closed down 70 cents, or 2.4%, at $29.05.

The analog and mixed signal semiconductor company priced an upsized $200 million of the notes at around the midpoint of talk.

Initially the size of the Rule 144A deal was talked at $150 million. There is a $30 million greenshoe, which was upsized from $22.5 million.

Joint bookrunners were Morgan Stanley and J.P. Morgan Securities LLC. Lead manager was Stifel, Nicolaus & Co. Inc., and co-managers were Needham & Co., Craig-Hallum Capital Group and Roth Capital Partners.

The notes are non-callable with no puts. They have takeover protection and will be settled in cash, shares or a combination of cash and shares.

In connection with the pricing of the notes, Inphi entered into privately negotiated capped call transactions with certain of the initial purchasers of the notes. The cap price of the capped call transactions will initially be $52.06 per share, which boosts the initial conversion premium from the issuer’s perspective to 75%.

About $15.5 million of the proceeds will be used to pay the cost for the capped call transactions. The rest of the proceeds will be used for general corporate purposes, including potential acquisitions and other strategic transactions.

Mentioned in this article:

Inphi Corp. Nasdaq: IPHI

Pandora Media Inc. NYSE: P

Teva Pharmaceutical Industries Ltd. NYSE: ADS: TEVA

The Vitamin Shoppe NYSE: VSI

© 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.