FXCM strengthens; Molycorp adds; Array up; convertibles mostly quiet ahead of Nor’easter

By Rebecca Melvin

New York, Jan. 26 – FXCM Inc. traded in the mid 60s on Monday, remaining a notable feature of trade for the sixth straight day, as overall trading in the convertibles market quieted ahead of a major snowstorm developing in the northeastern United States. Metro areas including New York and Boston were expected to see 20 inches or more of snow and high winds that could snarl transportation and potentially cause heavy power outages.

FXCM was up to as high as 66 from about 64 on Friday, a Connecticut-based trader said.

Molycorp Inc. also traded actively in a continuation of Friday’s action, and those bonds – which are severely distressed – improved about 0.25 point to 8.75, the trader said.

Array BioPharma Inc.’s convertibles continued to trade up in tandem with higher shares of the Boulder, Colo.-based-biopharmaceutical company but on lighter volume compared to Friday. The Array securities pushed higher on news that it is acquiring the late-stage cancer drug encorafenib from Swiss pharmaceutical giant Novartis.

Otherwise there were no notable trends in convertibles as many market players in the northeast eyed storm preparations and many trading desks were shutting down early.

“There was some European outright demand flowing through to us. But the market was a little apathetic because of the weather,” a New York-based trader said. “People are trying to get home before the weather gets bad.”

On light volume, it felt like the market was a little better, but no trends should be read into what was happening due to the storm, he said.

A second trader, also based in New York, said, “It’s a bad day for market color because today there are no themes, just random trades.”

Tuesday’s session was not anticipated to be much better. “There is going to be a lot of school and road closures, a trader said.

D.R. Horton Inc. reported earnings that beat estimates as sales jumped, and the Fort Worth, Texas-based homebuilder said it is well-positioned for the spring selling season. But D.R. Horton’s 0% convertibles due 2021 were not heard in trade as shares rose $1.28, or 5.5%, to $24.38.

Shares of other homebuilders like Ryland Group Inc., Lennar Corp. and Toll Brothers Inc. were also in positive territory, but no levels were heard for the convertibles.

“It’s been a slow start,” a New York-based sellsider said at late morning.

Moving the opposite direction, shares of Brookdale Senior Living Inc. were sharply lower after the Brentwood, Tenn.-based operator of assisted-living homes for seniors warned that lower-than-expected demand and increased insurance-reserve adjustments hurt the latest quarter.

The Brookdale 2.75% convertibles due 2018 were last seen at 136 but hadn’t traded Monday, two sources said. The Brookdale shares ended down $2.79, or 7.6%, at $33.92.

One trader said that any markets he saw in homebuilders appeared to be in line, or flat, compared to the underlying shares.

FXCM edges up

FXCM’s 2.5% convertibles due 2018 traded at as high as 66, which was up from 64 last, sources said.

“FXCM was up a little,” a trader said.

FXCM shares were also better, ending the session up 7 cents, or 3%, at $2.44.

The bonds trade separately from the shares, however, a Connecticut-based trader said.

A second trader said that there was follow through from last week, and the FXCM convertible was looking better as people were betting money that it was money good.

“It is going to have asset sales and repay the loan, so it looks like a deal to maturity,” a trader said.

The trader said that the mid 60s looked like the right amount to pay to compensate for the risk.

“There were plenty of people that got out in the 30s and 40s, and no more are believing,” he said.

The FXCM convertibles traded back and forth between the mid 60s and the low 40s last week. They had plunged to as low as 30 on the day after the Swiss National Bank moved to unpeg its currency from a cap.

That sharp currency move caused many FXCM clients to lose on trades and put the currency trading company in breach of margin requirements.

Leucadia National Corp. hammered out a financing agreement that constituted a bailout for the foundering FXCM company.

Molycorp trades at 8.75

Molycorp’s 6% convertibles due 2017 traded at about 8.75, which was up from 8.25 on Friday.

Molycorp’s 5.5% convertibles were trading in the same context, a trader said.

“The stock has kept going down. Not many of these bonds traded between 30 and 10, and now they are trading,” he said.

Molycorp shares popped after a drag lower on Friday when DA Davidson downgraded the company’s stock to “neutral” from “buy.”

Production issues at its Mountain Pass remain a concern, DA Davidson said.

Array extends climb

Array BioPharma’s convertibles were seen at 129 bid, 130 offered versus an underlying share price of $7.72 at the end of Monday.

Array shares, which surged on Friday, extended gains, ending up 69 cents, or 9.8%, to $7.80 on Monday.

The bonds expanded on a dollar-neutral basis over the course of the two days. “It really depends on your delta, but the bonds opened up 8 or 9 points,” a trader said.

Array announced ahead of Friday’s session that it has inked an agreement to acquire a cancer drug from Novartis that is in late-stage clinical trials for use as a skin cancer treatment.

On Friday, Array’s convertibles traded at 119, which was up from 95 previously, and shares surged $2.06, or 41%, to $7.11.

Mentioned in this article:

Array BioPharma Inc. Nasdaq: ARRY

Brookdale Senior Living Inc. NYSE: BKD

D.R. Horton Inc. NYSE: DHI

FXCM Inc. Nasdaq: FXCM

Lennar Corp. NYSE: LEN

Molycorp Inc. NYSE: MCP

Ryland Group Inc. NYSE: RYL

Toll Brothers Inc. NYSE: TOL

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