Greenbrier deal set to price; Teva convertibles in decline as patents nixed; Rayonier lower

By Stephanie N. Rotondo

Seattle, Jan. 31 – Convertible bond trading remained muted on Tuesday as the common stock market remained under pressure.

The Dow Jones industrial average ended the day down more than 100 points. The Dow was off around 150 points as of mid-morning, retreating farther away from the 20,000-mark hit last week.

In the primary space, investors were looking toward the Greenbrier Cos. Inc.’s planned $175 million sale of convertible senior notes due 2024.

The deal – which was first announced on Monday – was talked at a 3.25% to 3.75% yield and an initial conversion premium of 30% to 35%.

The deal was expected to price after the market closed on Tuesday via Goldman Sachs & Co. and BofA Merrill Lynch. Ahead of pricing, the company’s stock was off $1.60, or 3.53%, at $43.75.

Pricing information was not available as of press time.

Meanwhile, Teva Pharmaceutical Industries Ltd.’s 0.25% convertible notes due 2026 were losing ground in the wake of news that a U.S. District Court had invalidated four patents tied to its Copaxone drug, a treatment for multiple sclerosis – and the company’s largest revenue generator.

Rayonier Advanced Materials Inc.’s convertible preferreds were also under pressure, as well as the underlying equity. Earnings that disappointed investors drove the weakness.

In other earnings news, Rambus Inc.’s 1.125% convertible notes due 2018 were seen just south of 118.5 in Tuesday trading, though overall liquidity in the name was limited.

Earlier in the day, a trader expressed surprise that the issue was not more active, given that the stock had gotten hit in the wake of poor quarterly results.

The shares fell $1.00, or 7.15%, to $12.98.

The Sunnyvale, Calif.-based memory chip maker posted a fourth-quarter loss of $3.4 million, or 3 cents per share. The company had reported a profit the year before.

On an adjusted basis, EPS was 16 cents.

Revenue came to $97.6 million.

The results were about in line with expectations of analysts polled by Zacks Investment Research.

The company also issued guidance for the current quarter, forecasting EPS of 13 cents to 17 cents, on revenue of $93 million to $98 million.

Teva wanes on ruling

Teva’s 0.25% convertible notes were in decline on Tuesday as investors digested news that a court had invalidated four patents related to its biggest revenue generating product, Copaxone.

The paper ended in a 106 to 107 context. The convertibles were seen trading around 107 in early dealings, off 1 to 2 points.

The underlying equity was also lower, falling $1.60, or 3.53%, to $33.43.

Five companies had filed the patent suit against Teva, claiming that the protections were no longer valid. Teva asserted that its patents protected it from generic competition until 2030.

Earlier this month, Teva said that two planned generic releases could cut revenues by $1 billion to $1.2 billion and profits by $650 million to $800 million this year alone.

In its ruling, the court said that Teva’s newest patents contained no new innovations and were thus unnecessary.

Rayonier falls

Rayonier Advanced Materials’ 8% series A mandatory convertible preferreds (NYSE: RYAMPrA) got smashed after the company posted earnings.

The $100-par preferreds dropped $20.56, or 16.81%, to $101.72, while the common stock declined $3.21, or 19.13%, to $13.57.

For the fourth quarter, the Jacksonville, Fla.-based chemical company reported an $11 million profit, equating to 11 cents per share. Revenue was $231 million.

The results compared to EPS of 30 cents on revenue of $242 million the year before.

The company also warned that pricing headwinds could weigh on the current year’s results as well.

Management said it expected cellulose prices to fall another 3% to 4% this year.

Rayonier said it is working on ways to cut costs until prices rebound.

Mentioned in this article:

The Greenbrier Cos. Inc. NYSE: GBX

Rambus Inc. Nasdaq: RMBS

Rayonier Advanced Materials Inc. NYSE: RYAM

Teva Pharmaceutical Industries Ltd. NYSE: TEVA

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