DISH remains topical in convertibles market; Finisar paper slips on China slowdown worries

By Stephanie N. Rotondo

Seattle, April 19 – Convertible bond market players continued to eyeball DISH Network Corp. paper in midweek trading.

The good news was that the convertibles – as well as the equity – were rebounding after trading down since the start of the week.

The 3.375% convertible notes due 2026 traded up as high as 116.375, according to one market source. That compared to levels around 113.75 on Tuesday.

At mid-morning, the convertibles were seen rising a deuce to the 115.75 area.

As for the 2.375% convertible notes due 2024, they gained about 2 points, ending in a 99.25 to 99.75 context, one source reported.

The underlying shares were up $1.54, or 2.69%, at $59.58.

The securities were pressured by news out on Monday that DISH had scooped up $6.2 billion in wireless spectrum at a recent government auction. But it is unclear what the Englewood, Colo.-based company plans to do with its hefty airwave inventory.

“We believe that the purchase stretches to the limit how much debt the company can take on relative to its Ba3 ratings, without either borrowing directly against its significant spectrum holdings or contributing some or all of the spectrum to the restricted group, though it will not affect the company's credit ratings,” Moody’s Investors Service said in a research report out Tuesday.

Moody’s also noted that there are conditions on the newly acquired spectrum that could “complicate hopes for an M&A or leasing transaction – such as with Verizon – unless this spectrum were excluded from such a transaction or a waiver from the FCC were attained.”

Meanwhile, Finisar Corp. was somewhat busy in trading, as concerns about a possible slowdown in China’s fiber-optics market worried investors.

A market source pegged the 0.5% convertible notes due 2036 at levels just north of 90, which was called a loss of about 3.25 points. The 0.5% convertible notes due 2033 lost about 3 points as well, closing in a 103 to 103.5 range, the source said.

Earlier in the day, the 2036 paper was seen at 90.75. The 2033 convertibles were down about 2.25 points at 104.25.

Finisar stock also sold off, losing $2.09, or 8.77%, to end at $21.75.

Fiber optics companies that do work in China had a good year in early 2016, but as spending on new projects waned toward the year’s end, investors grew concerned about how that might impact firms such as Finisar.

For its part, about 20% of Finisar’s revenue comes from China.

That being said, there is buzz that China will start inking deals again this spring, which could improve orders in the end of 2017.

Great Ajax bringing new deal

The convertible new issue market has been silent for a couple of weeks now, but Great Ajax Corp. could be breaking the cycle.

The Beaverton, Ore.-based real estate investment trust said late Wednesday that it was selling $75 million of convertible senior notes due 2024.

Raymond James & Associates Inc. and JMP Securities are leading the deal.

The proposed issue is a little unusual, given that it is $25-par and that it will be listed on the New York Stock Exchange.

Ahead of the announcement, Great Ajax’s stock was seen sliding a penny to $13.08.

The issue is contingently convertible and is putable only upon a fundamental change.

Proceeds will be contributed to the operating partnership, which will then use the funds to acquire additional mortgage loans and mortgage-related assets consistent with the firm’s investment strategy. The funds might also be used for general corporate purposes.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

Finisar Corp. Nasdaq: FNSR

Great Ajax Corp. NYSE: AJX

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