8/22/12
Wright Medical (WMGI)
$200m (+30m) sen unsec cb coming tonight from JPM. Terms: 5yr 2.25-2.75% up 22.5-27.5, full pctns. UOP = hedge/buyback debt (incl $29 2014 cb). Small $830m orthopedic device maker w/PF debt = 201m (cb), cash=227m, LTM ebitda=54m, fcf = 31m, lev =3.7x. We’ll assume B & L+550. Small adv (335k), no leaps, 2yr 10/50%ile 28/37. Given size of co & low adv this again is not a model trade so should serve as sanity check. We’ll use 25 vol. Theo = 102.7. Premos extended in low rate env/technical shortage of paper so a 100 cb w/25 prem is going to be wanted regardless of credit quality ( & this is not a bad one), equity holders should want the 2.5% coupon. Model is less relevant nowadays which changes our mids recommendation to a simple BUY
Global orthopaedic medical co, focused on extremity, hip, and knee repair and reconstruction.
PF Cash $227m
PF debt $201m
LTM EBITDA $54m
LTM FCF $31m
Leverage 3.7x
Mkt cap $789m
Small orthopaedic device co w/leading pos in foot and ankle. Mkt dominated by large players inc stryker and Zimmer. Working on repositioning – focus on higher growth extremities biz, transitioning to direct sales force for foot ankle, & improved inv mgmt. Sales & margins will continue to be under pressure but cash flow improving. New converts will be only debt. Recently disclosed US attorney subpoena adds uncertainty. Our assigned spread L+550