Holiday weighs on convertible bond volume; primary calendar builds; Vipshop firms

By Stephanie N. Rotondo

Seattle, Feb. 21 – The shortened holiday week started out slowly for the convertible bond market, a trader reported on Tuesday.

“This is a week people take off,” he said.

Though liquidity was limited overall, Vipshop Holdings Ltd. was relatively active, trading up about half a point outright on the back of earnings.

The underlying stock meantime jumped over 7% for the day.

Meanwhile, GNC Holdings Inc.’s 1.5% convertible notes due 2020 also got a shot in the arm, following the equity higher. The gains were attributed to news that the health and nutrition products company was launching a new loyalty program – a move that is hoped to drive same-store sales upward.

As for the primary, there were no new issues priced during the session, but two deals were added to the calendar.

Parker Drilling Co. said it was selling $50 million of series A mandatory convertible preferred stock. That was in addition to a common stock offering of 12 million shares.

Barclays is running the books.

Proceeds will be used for general corporate purposes.

Across the Pond, Deutsche Wohnen AG announced plans to sell €800 million of convertible debt due 2024.

Price talk is for a 0.2% to 0.45% yield and an initial conversion premium of 48% to 58%. Pricing is expected by Feb. 27.

Like Parker, Deutsche Wohnen is also raising €500 million in new capital through an equity offering. The company plans to use the combined proceeds for a cash tender offer on convertible bonds due 2020 and for acquisitions.

Vipshop firms; Albany wanes

Vipshop’s 1.5% convertible notes due 2019 ticked up a touch on Tuesday after the company reported better-than-expected earnings on Monday.

A trader noted that at current levels in a 100.125 to 100.5 range, the convertibles were trading with a 55% premium.

The underlying stock was also better, rising 87 cents, or 7.15%, to $13.03.

The Chinese online discount retailer reported its fourth-quarter results on Monday, showing a 36.5% gain in revenue and a 39% increase in active customers. Net income was meantime up nearly 52% year over year.

A conference call was scheduled for Tuesday morning.

In other earnings news, Albany Molecular Research Inc.’s 2.25% convertible notes due 2018 took a hit after reporting a quarterly loss.

The convertibles dropped nearly 11 points outright to a 119 handle, according to a market source.

The stock declined $2.22, or 11.93%, to $16.39.

For the fourth quarter, Albany posted a loss of $15.4 million, or 37 cents per share. On an adjusted basis, earnings per share came to 34 cents.

Analysts polled by Zacks Investment Research had forecast adjusted EPS of 48 cents.

Revenue was $191.3 million.

GNC rises

GNC Holdings’ 1.5% convertibles added 4 points outright on Tuesday after the company announced a new customer loyalty program.

A market source placed the issue at 54, while another saw the paper at 54.25.

The company’s shares meantime ended up 90 cents, or 11.78%, at $8.54.

GNC has inked a multiyear deal with data company Epsilon to run a loyalty program that will allow customers to earn points and collect rewards.

The announcement comes after the company reported its fourth-quarter and full-year earnings last week, showing a 6.5% decline in same-store sales. The company also noted that it has more debt than available cash.

FelCor up on takeover

FelCor Lodging Trust Inc.’s $1.95 series A cumulative redeemable convertible preferred stock (NYSE: FCHPrA) was gaining ground on news the real estate investment trust was being acquired by Ashford Hospitality Trust Inc.

The convertible preferreds were up 19 cents at $24.85. As for the common shares, they were up 70 cents, or 9.68%, at $7.93.

Ashford is paying $9.27 per share for FelCor stock, a 28.2% premium over Friday’s closing share price. All told, the deal is valued at $1.27 billion.

FelCor is an Irving, Texas-based real estate investment trust.

Mentioned in this article:

Albany Molecular Research Inc. Nasdaq: AMRI

FelCor Lodging Trust Inc. NYSE: FCH

GNC Holdings Inc. NYSE: GNC

Parker Drilling Co. NYSE: PKD

Vipshop Holdings Ltd. NYSE: VIPS

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