Post-holiday convertible bond trading subdued; Intercept’s new issue lower; Akamai gains

By Stephanie N. Rotondo

Seattle, July 5 – After rising on Friday, the convertible bond market came back after the long holiday weekend to a weaker tone.

“The way Europe was down, we were going to be down regardless,” a trader said. The Dow Jones industrial average traded down over 100 points on Tuesday. The S&P 500 index and the Nasdaq Global Select Market also ended lower.

The day’s declines came as European stocks got hammered. Investors there pushed down the market as concerns about slowing economic growth – especially amid the United Kingdom’s election to leave the European Union – grew.

But given the weakness – and the fact that it was July 5 – liquidity in the convertibles space was limited.

“July 5 is always a dead day,” one trader said. “People take this week off.”

The trader pointed out that even Intercept Pharmaceuticals Inc.’s $400 million of 3.25% convertible notes due 2023 were not moving much.

The notes ended in a 103.375 to 103.875 context, off half a point to a full point.

The equity was off $2.89, or 1.97%, at $143.47.

That issue came Thursday, with an initial conversion premium of 32.5%, according to pricing term sheet.

The registered deal priced at the midpoint of talk for a 3% to 3.5% coupon and 30% to 35% premium.

There is a $60 million greenshoe for the deal that was sold via joint bookrunners RBC Capital Markets LLC, UBS Investment Bank, BofA Merrill Lynch, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC.

Away from the new-ish deal, Akamai Technologies Inc.’s 0% convertible notes due 2019 were unchanged to slightly better, even as the equity declined.

The notes closed at 98.875 bid, 98.375 offered. The stock meantime ended at $54.25, off $1.25, or 2.25%.

On Friday, it was reported that Akamai’s decade-long intellectual property fight with Limelight Networks Inc. had come to an end, as a U.S. district court judge ruled in favor of Akamai.

The ruling awarded the company $51 million in damages.

The lawsuit centered on a patent created at Massachusetts Institute of Technology and licensed to Akamai. Another patent infringement suit against Limelight is still pending, with trial set for January 2017.

Whiting weakens

Whiting Petroleum Corp.’s 1.25% convertible notes due 2020 fell Tuesday after the oil and gas company said it had swapped another $1.09 billion of notes for new mandatory convertible notes.

The 1.25% convertibles fell to 79 bid, 79.5 offered from 80 to 81 previously, according to a market source.

Another source placed the issue around 79, off nearly 2 points for the day.

The stock meantime dipped $1.22, or 12.63%, to $8.44.

Whiting has been exchanging five series of its notes for the new mandatory convertibles in an effort to shore up its bottom line amid declining oil prices. The most recent $1.09 billion exchange was done through private transactions executed June 29 through July 1. Prior to that, the company said on June 22 that it was exchanging $1.065 billion of old debt for the new debt.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Intercept Pharmaceuticals Inc. Nasdaq: ICPT

Whiting Petroleum Corp. NYSE: WLL

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