Morning Commentary: Blackstone Mortgage hovers around discounted issue price; AMD debt trades lower

By Stephanie N. Rotondo

Seattle, May 2 – Blackstone Mortgage Trust Inc.’s $250 million of 4.375% convertible senior notes due 2022 were trading right around the issue price in early Tuesday trading.

A trader pegged the paper in a 98.5 to 99 context.

The company’s shares (Nasdaq: BXMT) were down 21 cents at mid-morning, trading at $30.81.

The deal came late Monday with an initial conversion premium of 15%. In addition to pricing at the cheap end of talk, it came at a discounted price of 99.

Given the cheapness, one market source opined that the deal was not geared toward traditional convertible bond players.

“It’s not convertible guys that I think this is really suited for,” the source said. “It would be good for a bond fund, to get the equity exposure.”

Meanwhile, Advanced Micro Devices Inc.’s 2.125% convertible notes due 2026 were falling further away from parity in the wake of the company’s earnings release.

A trader saw the issue at 161.5 bid, 161.75 offered, a loss of 25 points. With the underlying equity (Nasdaq: AMD) down $2.40, “parity is 30 points lower than it was yesterday,” the trader said.

The first-quarter results were about in line with expectations, as net loss narrowed 33% to $73 million and sales rose about 18% to $984 million. However, warnings that gross profit margin would likely be lower for the current quarter – thus probably resulting in yet another loss – had investors concerned that turnaround efforts were not going as well as they had hoped.

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