Incyte's $700 million two-tranche deal prices, trades up; Molycorp falls on wider loss

By Stephanie N. Rotondo

Phoenix, Nov. 8 - A convertible bond trader said Friday's session was on the quiet side, though investors did appear to be keen on Incyte Corp.'s new $700 million two-tranche deal.

"It's all invisible volume," he said, as a lot of trading was taking place in the new deal.

Late Thursday, Incyte brought the deal, which consisted of $350 million of 0.375% notes due 2018 and $350 million of 1.25% notes due 2020.

The underlying shares ended the day up almost 1.5%.

In the secondary, Molycorp Inc.'s 3.25% convertible notes due 2016 "came in a point," according to the trader, after the company reported a wider quarterly loss.

The stock was trading up about 6.5% as of midday but came back to end up only about 1.8%.

Incyte prices, pops

Incyte brought $700 million of convertible senior notes in two tranches, including $350 million of 0.375% notes due 2018 and $350 million of 1.25% notes due 2020, late Thursday, according to a press release.

A trader saw the 0.375% notes trading at 104 bid, 104.75 offered early on Friday, while the 1.25% notes were at 104.25 bid, 105 offered.

The underlying shares were up nearly 3% at that point.

After the close, a market source said the issues both finished with a 104 handle.

The stock meantime closed at $37.50, up 53 cents, or 1.43%.

Both Rule 144A tranches have a $25 million greenshoe and were sold via Goldman Sachs & Co., J.P. Morgan Securities LLC and BofA Merrill Lynch as joint bookrunning managers.

The initial conversion rate per each $1,000 of notes is 19.3207 shares of common stock, representing an initial conversion price of $51.76 per share, or an approximately 40% premium over Thursday's closing share price of $36.97.

Entities affiliated with Julian C. Baker, a company director, have indicated an interest in purchasing up to $500 million of the notes.

Up to $500 million of the proceeds will be used to repurchase or retire a portion of the company's 4.75% convertible senior notes due 2015 through open-market transactions, negotiated transactions or otherwise.

Wilmington, Del.-based Incyte is a biopharmaceutical company.

Molycorp bonds pressured

Molycorp reported a wider loss for the third quarter on Friday, sending its bonds downward.

Early in the session, the 3.25% convertible notes due 2016 "came in a point," according to the trader, pegging the issue around 69, which compared to a 69.75 to 70 range on Thursday.

However, the stock was trading up about 6.5% as of midday.

"Nobody really trusts the company," the trader remarked, pointing to the company's recent calls for additional cash, even as it cut revenue and production forecasts.

Near the market's close, another trader quoted the convertible notes in a 69 to 70 context.

He also saw the 10% notes due 2016 at 971/2, which compared to 98 bid, 99 offered on Thursday.

By the end of the day, the equity came off of its highs, ending up 8.5 cents, or 1.79%, at $4.845.

The Greenwood Village, Colo.-based mining company attributed its wider loss to lower prices for rare earth metals.

For the quarter, net loss was $69.9 million, or 43 cents per share. That compared to a loss of $18.9 million, or 19 cents per share, the year before.

Revenue dropped 27% to $149.1 million.

Analysts polled by Thomson Reuters were expecting a loss of 28 cents per share on revenue of $161 million.

However, the company was able to trim costs, which fell 18% to $150.4 million.

As of the end of the quarter, cash and equivalents was at $173.9 million. Molycorp is expected to burn through $60 million of that on capital expenditures before the year is out.

Mentioned in this article:

Incyte Corp. Nasdaq: INCY

Molycorp Inc. NYSE: MCP

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