Convertibles trade mildly with higher shares; FireEye tranche A notes active; energy quiet

By Rebecca Melvin

New York, July 10 – Many U.S. convertibles moved in tandem with their underlying shares on Friday as optimism regarding Greece’s latest reform proposals sent equities broadly higher.

Greece has offered up a series of reforms that are in line with creditors’ earlier demands, making it more likely that the parties can strike an agreement. In exchange for reforms, Greece is asking for loans to cover its financing needs until 2018 and to restructure debt due after 2022.

FireEye Inc.’s bonds were among the most actively traded convertibles in the early going with the FireEye A tranche seen at 108.5 to 108.55, which was up from 107.875 on Thursday, according to a market source.

FireEye, the Milpitas, Calif.-based network security company, priced an upsized $800 million of 20-year convertible senior notes in two tranches at the end of May, including $400 million of 1%, series A notes and $400 million of 1.625% series B notes.

FireEye shares ended near their highs for the day, up 78 cents, or 1.6%, at $49.69.

Intel Corp.’s 3.25% convertibles due 2039 were trading at about 146 when the underlying shares of the Santa Clara, Calif.-based chipmaker were up about 0.5% last. Those bonds had traded between 144 and 147 on Thursday, according to Trace data.

But overall the convertibles space was quiet.

Cinedigm Corp.’s shares jumped 7 cents, or 10.5%, to $0.73. But the 5.5% convertibles were not heard in trade. The New York-based company manages distribution rights of independent movie and television content. The paper was last heard in trade at 102 when the shares were at $0.95.

“It was relatively quiet, and unchanged. Energy was unchanged,” a New York-based trader said. Energy was quiet despite pressure on the underlying shares of many of those issues.

About the only energy convertible in action on the trader’s desk was Cheniere Energy Inc. Those bonds were quoted at 73.375 bid, 73.5 offered with the underlying shares around $65.00. The shares were up about 0.8%, and the bonds were roughly unchanged, the trader said.

Most market players are waiting to see what happens with Greece, the trader said.

Although the broader markets were up, oil was lower for much of the session, but it pared early losses.

Early on the price per barrel of West Texas Intermediate crude for August delivery was down 49 cents, or nearly 1%, at $52.29. It ended at $52.81 per barrel.

The International Energy Agency said Friday in its monthly market report that global oil demand will grow at a slower pace this year and next year, averaging 1.2 million barrels a day in both the third and fourth quarters of this year, compared to 1.4 million barrels in the second quarter and 1.8 million barrels a day in the first quarter.

At the same time, supply is at or near highs; therefore, a bottom for the crude oil market may still be ahead, the Paris-based IEA said.

During the week, investor focus shifted from Greece to China to Greece again. On Thursday, convertibles saw a strong bid, encouraged by the snapback in Chinese stocks and better U.S. stocks.

The improvement came after a three-day slide in China-related convertibles in response to a rout in Chinese stocks that has left the Shanghai Composite index down more than 25% from its June 12 high.

Mentioned in this article:

Cheniere Energy Inc. NYSE: LNG

Cinedigm Inc. Nasdaq: CIDM

FireEye Inc. Nasdaq: FEYE

Intel Corp. Nasdaq: INTC

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