Nvidia convertibles trading, but ‘too deep in the money’; Dycom holds in; Fomento debt jumps

By Stephanie N. Rotondo

Seattle, Nov. 23 – Trading in the convertible bond market was subdued on Wednesday ahead of the Thanksgiving holiday.

A trader said that Nvidia Corp.’s 1% convertible notes due 2018 were making up the majority of the day’s early trading activity on Wednesday.

“It’s the only thing that’s trading,” he said, seeing about $20 million of the bonds moving by mid-morning.

However, he wasn’t all that excited about those trades, seeing them with a 464 handle.

“It’s like trading stock at this point,” he said. “It’s too deep in the money to be meaningful.”

As for the actual stock, it was up $1.51, or 1.62%, at $95.01.

On Friday, the chipmaker reported record sales for the latest quarter. The company posted total sales of $2 billion, which was up 54% year over year.

Nvidia’s chips have been on fire of late, getting used in new gaming consoles for Nintendo, in Tesla Motors Inc.’s cars and at data centers for big names such as Microsoft Corp. and Amazon.com Inc.

Dycom Industries Inc.’s 0.75% convertible notes due 2021 were meantime seen holding at 106.25 versus a share price of $75.07, according to a trader.

He noted that the trades were on a 65% delta.

The convertibles dropped about 12 points on Tuesday in the wake of earnings that beat on a per-share basis but missed revenue estimates.

For its fiscal first quarter, Dycom posted EPS of $1.67 on revenue of $799.22 million. For its part, revenue was up 21.2% year over year.

However, analysts had forecast EPS of $1.65 on revenue of $801.34 million.

The company also provided guidance for the current quarter, setting adjusted EPS expectations in a range of 61 cents to 73 cents. Revenue is expected to be between $640 million and $670 million.

Analysts are predicting EPS of 72 cents.

Dycom is a Palm Beach, Fla.-based provider of skilled contract workers.

Fomento conversion nixed

Fomento de Construcciones y Contratas SA’s €32.75 million of 6.5% unsecured convertible notes due 2020 got a significant boost on Wednesday after the company was barred from forcing a conversion of the notes.

A market source saw the issue ending just under 101.5. That was a gain of nearly 62 points on the day.

The Barcelona, Spain-based construction company initially said on Oct. 7 that it was forcing a conversion of the bonds from Oct. 26 to Oct. 31. On Oct. 24, the company said that the conversion was on hold due to “impediments that prevent the conversion process taking place as initially envisaged.”

On Wednesday, the English Court of Appeal dismissed Fomento’s appeal of the order issued by the English High Court last April 2015. The decision is now final, according to a company update.

Noteholders can now demand accelerated repayment of their notes on an individual basis.

The forced conversion price was €21.50. The company’s stock closed at €8.474 on Oct. 6.

As of Wednesday’s close, the stock was at €7.80.

Mentioned in this article:

Dycom Industries Inc. NYSE: DY

Fomento de Construcciones y Contratas SA BME: FCC

Nvidia Corp. Nasdaq: NVDA

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