SunEdison weaker on hedge despite better shares; Avid shares bounce; trading volume thin

By Rebecca Melvin

New York, Aug. 12 – SunEdison Inc.’s convertible bonds continued to contract on Wednesday despite a reversal in the common shares of the St. Peters, Mo.-based solar technology company that left that stock up 6.7% on the day. The shares had been sharply lower in the early going.

“They have not been acting well,” a Connecticut-based trader said of the newest set of longer-dated SunEdison convertibles. “They are still crunching even with the stock turnaround.”

SunEdison dominated Wednesday’s convertibles trading action even as equities were rocked by volatility.

Volume in most energy and technology convertibles was light and their response to the intraday turnaround in equities was not measurable, traders said.

“It’s not trading enough to really notice,” one Connecticut-based trader said of energy.

Avid Technology Inc.’s 2% convertibles due 2020, of which $135 million priced in June, were indicated lower despite a bounce back in the common shares of the Burlington, Mass.-based digital media company following a punishing drop on earnings on Tuesday.

The Avid 2% bonds were seen around 75, which was down from around 81, according to a market source. Meanwhile Avid shares regained 10% to close at $9.40, after dropping about 30% on Tuesday.

Avid disappointed on second-quarter sales, which fell 12% to $112 million, and also on the bottom line, but still raised full-year guidance above estimates.

Volume was light as traders watched equity markets first continue to sell off amid concerns over China, and then rally back, led by energy names after oil prices recovered ground.

West Texas Intermediate crude for October delivery recouped 18 cents, or 0.4%, to $44.05 per barrel on Wednesday, bouncing off a six-year low notched on Tuesday.

Earlier markets were fixed on the China government’s move to devalue the yuan on Tuesday. The People’s Bank of China set the yuan fixing at 6.3306 against the U.S. dollar on Wednesday, which was about 1.6% weaker than the Tuesday devaluation level.

The depreciation of the yuan was read as an artificial move to help bolster China’s exports and thereby economic growth, to the detriment of exporters of the United States and elsewhere.

Equity markets opened sharply lower, but the Dow Jones industrial average ended essentially unchanged at 17,402.51 after dropping more than 1%. The S&P 500 stock index added 1.98 points to 2,086.05 after an early slide, and the Nasdaq Composite closed up 7.6 points, or 0.2%, at 5,044.39.

SunEdison down on hedge

The SunEdison 3.375% convertibles due 2025 were seen around 69 at the end of the session against shares that closed higher by 90 cents, or 6.7%, to $14.25.

Earlier the SunEdison 3.375% convertibles were seen down another 2 points to 67 with shares as low as $11.90.

They were weaker on a hedged basis – “in excess of 2 points weaker,” a New York-based sellsider said.

A second source said that the SunEdison convertibles “were not acting well.”

There was “very active call buying in Sept. 14 calls $1.60 and a huge reversal in the common, which was as low as $11.78 but closed $14.28,” a third source, also based in New York, said.

Also closing around 69 was the second of the newest tranches, the SunEdison 2.625% convertibles.

SunEdison’s 2.75% convertibles due 2021 traded down to about 109 from 112 to 114 on Tuesday and down from 124 on Monday.

SunEdison’s common shares fell to an $11.00 handle before correcting. But the stock has still lost about a third of its value since reporting disappointing earnings last week.

Behind Wednesday’s improvement was the company’s news that it has syndicated a seven-year term loan facility of TerraForm Private Warehouse worth $280 million. The company said that the offering was oversubscribed and was placed with a diverse group of institutional investors at an interest rate of Libor plus 400 basis points.

Mentioned in this article:

Avid Technology Inc. Nasdaq: AVID

SunEdison Inc. Nasdaq: SUNE

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