Planned Anacor convertible looks about 2 points cheap; Gran Tierra, Medallion also on deck

By Rebecca Melvin

New York, March 31 – Market players were sizing up new deals in the convertibles space on Thursday, including Anacor Pharmaceuticals Inc.’s $250 million of seven-year convertibles and Gran Tierra Energy Inc.’s $100 million of five-year convertibles, which were expected to price after the market close.

The planned Anacor bonds were looking about 2 points cheap at the midpoint of price talk using a credit spread of 700 basis points to 750 bps over Libor and a 44% to 45% vol., market sources said.

The common shares of Anacor and Gran Tierra dropped in trade, with Anacor ending down 9% and Gran Tierra ending down 7%.

Also in primary market action, Medallion Financial Corp.’s $25 million of five-year convertible senior notes were expected to price late Thursday, but the deal was too small to garner much focus.

“TAXI was too small to look at. It will be tightly held, I imagine,” a New York-based sellsider said, referring to Medallion’s stock symbol, TAXI.

Medallion is a New York-based specialty finance company that arranges financing for taxicab medallions and related assets. Medallion’s common shares traded down only 2% on the heels of the deal launch.

Back in established issues, Anacor’s existing 2% convertibles due 2021, which is a small, $82 million issue, did not appear to have traded. Those bonds were last seen at about 206.25.

WebMD Health Corp.’s convertibles were higher along with the underlying shares after news that the Elmwood Park, N.J.-based provider of online medical information will replace SunEdison Inc. in the S&P MidCap 400.

WebMD’s 2.5% convertibles due 2018 traded up 1.4 points to 113.25, and WebMD’s 1.5% convertibles due 2020 traded up 2.7 points to 131.875, according to Trace data.

Shares of WebMD ended up $3.04, or 0.5%, at $62.63.

SunEdison’s convertibles were not heard in early trade, but the whole complex had slumped along with the underlying shares earlier in the week and were seen Thursday at 3.5 bid, 4.5 offered, a Connecticut-based trader said.

An imminent bankruptcy filing is expected, the trader said about SunEdison.

Cemex SAB de CV was also trading actively, with the Cemex 3.72% convertibles due 2020 and the Cemex 3.73% convertibles due 2018 both up about 2 points to 92.55, according to Trace data.

The Cemex 3.75% convertibles due 2018 were at 103.375, which was within Wednesday’s 102.5 to 104 range.

The American Depositary Receipts of the Mexico-based cement producer have been on the rise all week and closed up 4 cents, or 0.6%, at $7.28 on Thursday.

Anacor looks cheap

Fair value of Anacor’s planned $250 million of seven-year convertibles came to about 102, using a credit spread of 700 bps over Libor and 44% vol. at the midpoint of price talk, a market source said.

Price talk was for a 1.75% to 2.25% coupon and a 30% to 35% initial conversion premium.

A second market source used a wider credit spread of 750 bps over Libor and 45% vol. and got a fair value of 101.75 at the midpoint of talk.

The Palo Alto, Calif.-based biopharmaceutical company is pricing $250 million of seven-year convertibles via bookrunner Goldman Sachs & Co. and has a greenshoe of $37.5 million of additional notes.

Proceeds from the Rule 144A offering will be used to fund the net cost of the capped call transactions and for general corporate purposes.

Anacor plans to enter into capped call transactions in tandem with the pricing of the notes.

SunEdison languishes

SunEdison’s convertible bonds were all around 4, a Connecticut based trader said Thursday.

That includes SunEdison’s 2% A tranche bonds through to the F bonds, and including the new 5% convertibles, the trader said.

SunEdison shares fell 5 cents, or 8%, to $0.54 on Thursday.

After the market close, SunEdison disclosed that it received a subpoena from the U.S. Department of Justice on Monday seeking information and documentation relating to certain financing in connection with the company’s acquisition of Vivint Solar, Inc.

The subpoena also seeks information on the conduct of a former non-executive employee who is alleged to have committed wrongdoing in connection with the Vivint termination negotiations, the previously disclosed investigations by the company’s audit committee, intercompany transactions involving the company and its yieldcos, TerraForm Power Inc. and Terra Form Global Inc., and the financing of the company’s Uruguay projects. Furthermore, the DOJ may have additional requests.

The company also received a nonpublic, informal inquiry from the Securities and Exchange Commission covering similar areas.

SunEdison said that the company and its board of directors intend to cooperate with the DOJ's inquiry and the SEC investigation.

Earlier Thursday there were headlines that the chief executive of both of SunEdison’s yieldcos, Brian Wuebbels, was forced to step down and will be replaced by a chair committee in the interim headed by the chairman of both subsidiaries, Peter Blackmore.

On Monday the company disclosed that the SEC is investigating whether the company lied to investors by overstating its cash position last fall.

And on Tuesday, SunEdison’s stock fell 55% to near $0.50 after TerraForm Global warned in a filing that SunEdison may go bankrupt.

SunEdison said in a filing that no wrongdoing has been found so far.

Meanwhile David Tepper’s Appaloosa Management LP, which is an investor in TerraForm, had attempted to block the Vivint acquisition, but a Delaware court had said that the acquisition could go through. In a separate suit, Tepper said that the Vivint deal’s take-or-pay agreements that make it necessary for TerraForm Power to buy projects from SunEdison or pay a fee are unfair.

Mentioned in this article:

Anacor Pharmaceuticals Inc. Nasdaq: ANAC

Cemex SAB de CV NYSE: CX

Gran Tierra Energy Inc. NYSE: GTE

Medallion Financial Corp. Nasdaq: TAXI

SunEdison Inc. Nasdaq: SUNE

WebMD Health Corp. Nasdaq: WBMD

© 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.