New ImmunoGen bond ends flat on debut; Dynegy launches $400 million of units; Par Pacific on tap

By Rebecca Melvin

New York, June 15 – ImmunoGen Inc.’s new 4.5% convertibles closed Wednesday right around par, or unchanged on a dollar-neutral basis, after the Waltham, Mass.-based biotechnology company priced $100 million of the five-year senior notes at the cheap end of talked terms, a New York-based trader said.

A second market source put the close on the new bonds at 100.25 to 101.

Also in the primary market, Houston-based power producer Dynegy Inc. launched an offering of $400 million of three-year tangible equity units that were being talked with a distribution rate of 6.625% to 7.125% and a premium of 22.5% to 27.5%.

The registered deal was expected to price after the market close.

Dynegy has an existing 5.375% mandatory convertible due 2017, which has an initial conversion price of $38.75 and is out of the money. Dynegy shares closed at $16.13, which was down 72 cents, or 4.3%, on the day.

Also in the primary market, Par Pacific Holdings Inc. launched an offering of $100 million of five-year convertible senior notes that it planned to price ahead of the market open on Thursday.

The Par deal was being talked to yield 4.5% to 5% with an initial conversion premium of 15% to 25% over its closing common share price on Wednesday.

The deal has a call provision if the company’s acquisition of Hermes Consolidated LLC is terminated. Under the provision, Par Pacific may redeem the notes for cash at 102% of par plus interest by delivering a notice of redemption before Aug. 9, 2016.

Back in established issues, Weatherford International Ltd.’s 5.875% exchangeables, which priced at the beginning of this month, pulled back 2.5 points on Wednesday. At late morning they were 116.6, according to Trace data, while the company’s stock was down 1.2% at $6.41. The stock closed a little lower at $6.26, or lower 3.7%. The convertibles had surged up to as high as 122 late last week.

Aegerion Pharmaceuticals Inc.’s 2% convertibles jumped more than a dozen points to about 57, according to a pricing source, after news that the Cambridge, Mass.-based biopharmaceutical company has agreed to be acquired by QLT Inc. Each share of Aegerion will be exchanged for 1.0256 shares of QLT common stock, and QLT plans to change its name to Novelion Therapeutics Inc. upon closing of the deal. Aegerion shares rose 38 cents, or 28.6%, to $1.71.

In the broader markets, the major equity indexes slipped again after the Federal Reserve said it would stand pat on interest rates as expected and lowered its projections on how much it expects to raise short-term rates in the next few years.

In a speech at the conclusion of the Federal Open Market Committee’s two-day meeting, Chairman Janet Yellen said the policy makers plan to stick to a plan to increase rates gradually as the U.S. economy improves. She reiterated her belief that the economy will grow at a moderate pace despite weak data such as the May jobs report, which showed the weakest job growth since 2010.

The central bank still expects to raise rates by 0.5% this year to a level of 0.875% by year’s end. But further out, the target was lowered to 1.625% for the end of 2017, down from an earlier forecast of 1.875%, and the fed-funds target rate for the end of 2018 was lowered to 2.375% from a 3% forecast that the Fed had in March.

The average Fed member expects the U.S. economy to grow at 2% this year, which is lower than the 2.2% growth rate seen in March. The unemployment rate is expected to dip to 4.6% in 2016. Inflation is expected to increase in 2016 at a faster rate than forecast in March, with the Fed projecting inflation this year of 1.4%, up from 1.2% seen in March. A 2% target inflation rate is expected to be reached by the end of 2018.

The Nasdaq Composite index closed off by only 8.62 points, or 0.2%, to 4,834.93, its fifth-straight loss. The Dow Jones industrial average closed down 34.65 points, or 0.2%, at 17,640.17, and the S&P 500 stock index shed 3.83 points, or 0.2%, to 2,071.50, just about matching its Tuesday session loss.

New ImmunoGen at par

ImmunoGen 4.5% convertibles due 2021 ended the session Wednesday at about 100, against an underlying stock that was essentially unchanged on the day, up a penny at $3.50 in strong volume. Earlier in the session, the new ImmunoGen 4.5% convertibles due 2021 had traded up slightly in line with the underlying shares.

Earlier the new bonds had changed hands at 100.8, according to Trace data, which was in line with the underlying shares that were up 3 cents, or 0.8%, at $3.52.

For the session – which was quiet – the bond traded actively, although less actively than other recent new deals.

The company priced $100 million of the five-year convertible senior notes late Tuesday at par to yield 4.5% with an initial conversion premium of 20%, which was the cheap end of talk for a 4% to 4.5% coupon and 20% to 25% initial conversion premium.

The deal priced despite a 29.5% slide in the underlying stock on Tuesday.

An affiliate of ImmunoGen’s financial advisor, J. Wood Capital Advisors LLC, purchased about 500,000 shares of common stock in one or more open market transactions on Tuesday prior to the pricing of the notes, according to a pricing term sheet.

ImmunoGen is a clinical-stage biotechnology company that develops targeted cancer therapeutics using its proprietary antibody drug conjugate technology. Its lead product is Mirvetuximab soravtansine, which is being advanced to Phase 3 testing for certain forms of ovarian cancer. And its market capitalization stands at just under $300 million.

The deal has a $15 million greenshoe and was marketed via bookrunner J.P. Morgan Securities LLC.

The notes are non-callable with no puts. Upon conversion, holders of the bonds will receive shares of ImmunoGen stock. The notes have takeover and dividend protection.

Proceeds will be used for operations including clinical trial expenditures, including the manufacture of experimental therapies, other research and development expenditures, and other corporate purposes, capital expenditures and for working capital.

Par Pacific to price

Par Pacific, a Houston-based energy and infrastructure businesses company, plans to price $100 million of five-year convertible senior notes ahead of the market open on Thursday.

Proceeds are earmarked to finance a portion of the purchase price of the previously announced Hermes Consolidated acquisition, to repay $5 million of the outstanding principal amount of the term loan under its delayed draw term loan and bridge loan credit agreement and for general corporate purposes.

The Rule 144A deal has a $15 million greenshoe and was being sold via bookrunner BofA Merrill Lynch.

The notes are non-callable for three years until June 20, 2019 and then provisionally callable if the stock trades above 140% of the initial conversion premium.

The notes have takeover and dividend protection and are convertible into cash, shares of stock or a combination of cash and stock at the company’s election.

In connection with the purchase of the notes, each owner of the notes will agree in writing not to hedge their economic exposure to Par Pacific common stock in any subscription rights offering on or before Sept. 30, 2016.

Mentioned in this article:

Aegerion Pharmaceuticals Inc. Nasdaq: AEGR

Dynegy Inc. NYSE: DYN

ImmunoGen Inc. Nasdaq: IMGN

Par Pacific Holdings Inc. Nasdaq: PARR

Weatherford International Ltd. NYSE: WFT

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