The Week That Was

Happy New Year!  We hope 2015 has gotten off to a good start for all.  As expected we did see new issuance resume this week.  We saw three new deals price, ranging in size from $100 million to $500 million. 

First up was The Medicines Company (MDCO), which came with a $300 million convertible deal.  MDCO is a biotech focused on the acute and intensive care hospital markets.  Unlike many biotechs, the company does have revenue, positive EBITDA, and positive FCF.  However the bulk of its revenue and cash flow come from one product - Angiomax (anticoagulant).  The proceeds from the deal provide the company with a good cash cushion, giving it some time to diversify the revenue stream.  Our HOCS slash line measured 72 Overall / 77 Growth / 60 Safety, a good score and as expected the deal traded well.

Brocade Communications Systems (BRCD) was up next with a $500 million deal.  The company is a supplier of networking hardware and software, including Storage Area Networking (SAN) solutions and Internet Protocol (IP) networking solutions.  BRCD is a good credit with strong/consistent free cash flow, a significant cash cushion, and moderate pro-forma leverage of 1.2x.  The new convertible received a lackluster HOCS score of 52 Overall / 45 Growth / 72 Safety based upon the final pricing.  As we mentioned in our new issue commentary, the score was adversely affected by the lack of growth, but the bond had good optics and we expected it to perform well - which it did. 

Resource Capital (RSO) also came with a small $100 million deal earlier in the week.  This is a REIT focused on commercial mortgage loans and other commercial real estate-related debt and equity investments.  As is customary, we did not comment on the issue because it is in the financial sector, but the deal didn't appear to be trading well in the secondary market.   

Earnings news remains very light, though we know it will be picking up later this month.  We saw announcements from two convertible companies this week.  Micron Technology (MU) reported first quarter 2015 earnings on Tuesday beating on EPS but falling short of consensus revenue estimates.  Ugly 20 “leader” RPM (RPM) announced second quarter 2015 earnings on Wednesday missing on both revenue and EPS versus consensus estimates.  The company also lowered its full year guidance for fiscal 2015 due to weakness in the European business.     

In other news this week, Hanwha SolarOne (HSOL) announced the company has entered into an agreement with a leading photovoltaic (PV) developer to supply 80 megawatts of solar PV modules to a project in Chile.........  ISIS Pharmaceuticals (ISIS) entered into a collaborative agreement with Janssen Biotech (a unit of J&J) to develop drug treatments for autoimmune disorders of the gastrointestinal tract.  ISIS received an upfront payment of $35 million and could receive up to an additional $800 million in milestone payments and fees over the life of the contract.  For more details please refer to our company update from January 7.........  Alere (ALR) announced the FDA has granted CLIA (Clinical Laboratory Improvement Amendments) waiver to Alere's influenza A and B test.  The waiver allows for broad use of the test by hospitals, physician offices, clinics, and other healthcare settings.........  JinkoSolar (JKS) announced its subsidiary, Zhejiang JinkoSolar, has entered into a $90 million working capital loan with China Development Bank.........  Air Lease Corp (AL) announced an offering of $600 million of 3.75% senior unsecured notes due 2022.  The deal is expected to close on January 14.  

Companies announcing earnings for the upcoming week include: KBH for Tuesday and INTC for Thursday.