The convertible new issues market got a needed “shot in the arm” from Gilead Sciences’ (GILD) $2.2 billion of convertible debt, the biggest sale since Ford Motor Company (F) sold $2.5 billion of 4.25% convertible debt due 2016 in November 2009. On July 27, 2010, Gilead issued $1.1 billion aggregate principal amount of 1.00% convertible senior notes due 2014 and $1.1 billion aggregate principal amount of 1.625% convertible senior notes due 2016 to qualified institutional buyers (QIBs) under SEC Rule 144A of the Securities Act of 1933.
The Value Line Convertible Indexes have long been used as benchmarks of convertible market performance. But these indexes are only part of the convertible market data that we compile and make available to subscribers. Our Convertible Market Profile provides important additional information about the convertibles market and how convertibles perform as an asset class.
Expectations for an improved domestic economy in the second quarter only materialized partially. Indeed, things seemed to be slowing again as the period ended after the initial burst. Our Especially Recommended Convertibles Index fell 1.3% in the second quarter, but it too remained positive for the year, up 2.7%. Our performance results underscore the defensive nature of our portfolio. While past results are no assurance of future performance, Value Line's Convertible Ranking System has proven effective over the years.
Microsoft’s (MSFT) sale of convertible notes could add some energy to the otherwise lackluster convertibles market. Around June 9, 2010, the company raised $1.25 billion of interest-free financing from its first sale of convertible notes in years.
Cadence Design Systems (CDNS) recently priced an offering of $300 million principal amount of cash convertible senior notes due 2015.
Bioval Corp. (BVF), Canada’s largest publicly traded drugmaker, and Valeant Pharmaceuticals Int’l (VRX) are coming together to form one company. The two decided to merge in a cash-and-stock deal, and the new company will be called Valeant Pharmaceuticals International, Inc. Both companies have outstanding convertible debt issues.
Yield advantage is the extra amount of return an investor would earn if he/she buys a convertible security in lieu of the common stock issued by the same company. That is to say, if the convertible yields 5% and the common stock yields 2.3%, the yield advantage would be almost three percentage points. Typically, almost all convertible securities are issued at a yield advantage over the underlying stock. This is one of the first things investors tend to look at when determining the relative attractiveness of a convertible over its underlying common stock. Usually, the yield advantage offered by a convertible will continue over its life, but there are situations when that yield advantage may contract or even disappear.
On April 7, 2010, Telvent, a global IT solutions and business information services provider, priced an offering of $175 million aggregate principal amount of 5.5% Senior Subordinated Convertibles Notes due 2015. The notes were sold in a private placement to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1993, as amended. What that means is buyers are aware the debt issue is not registered with the SEC at the time of purchase and the rules governing such debt may or may not be modified by the SEC. The company has also granted the initial purchasers a 30-day option to purchase up to an additional $25 million aggregate principal amount of the notes. The offering is set to close on April 19, 2010, subject to customary regulations.
The first quarter of 2010 was a volatile one, with an early year sell off followed by another run toward Dow 11,000. As usual, news filled the air, with such notable events as Ben Bernanke being reconfirmed as Chairman of the Federal Reserve, ongoing discussion of increased government regulation of the financial markets, the health care bill debate come the bill’s eventual passage, and disquiet surrounding the prospects for select European economies (most notably Greece) all flirting with center stage for investor attention.
Blockbuster, a long-established video rental company, indicated in a recent SEC filing that it may be close to filing for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. The company’s indebtedness totals about $1 billion. As a result, one ratings agency has already downgraded Blockbuster’s creditworthiness.
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Gilead Convertible Debt Sale
The convertible new issues market got a needed “shot in the arm” from Gilead Sciences’ (GILD) $2.2 billion of convertible debt, the biggest sale since Ford Motor Company (F) sold $2.5 billion of 4.25% convertible debt due 2016 in November 2009. On July 27, 2010, Gilead issued $1.1 billion aggregate principal amount of 1.00% convertible senior notes due 2014 and $1.1 billion aggregate principal amount of 1.625% convertible senior notes due 2016 to qualified institutional buyers (QIBs) under SEC Rule 144A of the Securities Act of 1933.
Value Line’s Convertible Indexes and Market Prolfiles
The Value Line Convertible Indexes have long been used as benchmarks of convertible market performance. But these indexes are only part of the convertible market data that we compile and make available to subscribers. Our Convertible Market Profile provides important additional information about the convertibles market and how convertibles perform as an asset class.
Especially Recommended Convertibles Still in Positive Territory
Expectations for an improved domestic economy in the second quarter only materialized partially. Indeed, things seemed to be slowing again as the period ended after the initial burst. Our Especially Recommended Convertibles Index fell 1.3% in the second quarter, but it too remained positive for the year, up 2.7%. Our performance results underscore the defensive nature of our portfolio. While past results are no assurance of future performance, Value Line's Convertible Ranking System has proven effective over the years.
Microsoft's New Convertible Debt Issue
Microsoft’s (MSFT) sale of convertible notes could add some energy to the otherwise lackluster convertibles market. Around June 9, 2010, the company raised $1.25 billion of interest-free financing from its first sale of convertible notes in years.
Cadence Design Systems New Convertible Senior Notes due 2015
Cadence Design Systems (CDNS) recently priced an offering of $300 million principal amount of cash convertible senior notes due 2015.
The Merger Between Biovail and Valeant
Bioval Corp. (BVF), Canada’s largest publicly traded drugmaker, and Valeant Pharmaceuticals Int’l (VRX) are coming together to form one company. The two decided to merge in a cash-and-stock deal, and the new company will be called Valeant Pharmaceuticals International, Inc. Both companies have outstanding convertible debt issues.
Current Yield Advantage: Choosing Between the Common and the Convertible
Yield advantage is the extra amount of return an investor would earn if he/she buys a convertible security in lieu of the common stock issued by the same company. That is to say, if the convertible yields 5% and the common stock yields 2.3%, the yield advantage would be almost three percentage points. Typically, almost all convertible securities are issued at a yield advantage over the underlying stock. This is one of the first things investors tend to look at when determining the relative attractiveness of a convertible over its underlying common stock. Usually, the yield advantage offered by a convertible will continue over its life, but there are situations when that yield advantage may contract or even disappear.
The Telvent Convertible Debt Issue
On April 7, 2010, Telvent, a global IT solutions and business information services provider, priced an offering of $175 million aggregate principal amount of 5.5% Senior Subordinated Convertibles Notes due 2015. The notes were sold in a private placement to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1993, as amended. What that means is buyers are aware the debt issue is not registered with the SEC at the time of purchase and the rules governing such debt may or may not be modified by the SEC. The company has also granted the initial purchasers a 30-day option to purchase up to an additional $25 million aggregate principal amount of the notes. The offering is set to close on April 19, 2010, subject to customary regulations.
Convertible Market Watch (1st Quarter 2010)
The first quarter of 2010 was a volatile one, with an early year sell off followed by another run toward Dow 11,000. As usual, news filled the air, with such notable events as Ben Bernanke being reconfirmed as Chairman of the Federal Reserve, ongoing discussion of increased government regulation of the financial markets, the health care bill debate come the bill’s eventual passage, and disquiet surrounding the prospects for select European economies (most notably Greece) all flirting with center stage for investor attention.
Blockbuster in Bankruptcy?
Blockbuster, a long-established video rental company, indicated in a recent SEC filing that it may be close to filing for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. The company’s indebtedness totals about $1 billion. As a result, one ratings agency has already downgraded Blockbuster’s creditworthiness.