All about converts

$400m ($60m) 144a senior convert pricing overnight from GS. Terms: 5yr bullet, 1.375-1.875% up 30%, prot. UOP=warrant trans & gcp. $5.8B mkt cap w/one drug on mkt ($5m/qtr rev). Another awaiting approval in Nov which will have Roche competition. PF Cash = $915m, debt=$560m. Neg EBITDA & cash burn expected to continue thru 2012. We’ll use L+650 (could argue wider) & cap vol @35v. Taking stk cown to $61.5 (closed $64.63), on best terms, theo=98.25. But is not a model trade. It’s stk dependent & there is loads to be shorted. If only 25% of deal goes to hedgies on a 70d, that is almost a day’s worth of volume to be shorted. Like we recently saw w/DNDN, negative gamma burns. we don’t need or like the o/n stk risk. Wait til cheaper. AVOID