Morning Commentary: WebMD convertibles trade up in active dealings on KKR purchase news

By Stephanie N. Rotondo

Seattle, July 24 – WebMD Health Corp.’s convertibles were easily dominating early trading in the convertible bond market on Monday, after it was announced private equity firm KKR & Co. was buying the company.

As of mid-morning, a trader said volume among WebMD’s three convertible issues took up about 85% of the total volume.

He saw the 2.625% convertible notes due 2023 trading with a 99 handle, while the 1.5% convertible notes due 2020 were pegged just north of 138.

He also saw the 2.5% convertible notes due 2018 trading near 105.5.

The trader noted that “there’s takeover protection involved.”

Another market source placed the 2.625% convertibles in a 99 to par context, which compared to 97.5 previously. The 1.5% convertibles were around 138, versus previous levels around 123.

And, the 2.5% convertibles were placed in a 105.5 to 106 range, up from 101.75.

As for the underlying equity (Nasdaq: WBMD), it was up nearly 20% by mid-morning.

KKR is paying $66.50 a share for WebMD, bringing the total purchase price to about $2.8 billion.

On a per-share basis, the price represented a 20.5% premium over Friday’s closing share price.

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