Weatherford expands as oil drops; BioMarin jumps on takeout chatter; older Tesla thrashed

By Rebecca Melvin

New York, July 7 – Light volumes persisted in U.S. convertibles on Thursday, but a couple of important names traded notably better despite a slide in oil prices and pullback in equities throughout the session, market players said.

Weatherford International Ltd. performed well, expanding about 0.75 point on a dollar-neutral basis, as oil prices tumbled more than $2.00, or 5%, to $45.17 per barrel as oversupply fears resurfaced following soft U.S. inventory data.

BioMarin Pharmaceutical Inc.’s convertibles jumped on an outright basis and expanded on swap after a report that Swiss pharmaceutical company Roche is mulling a buyout offer for the San Rafael, Calif.-based pharmaceutical company, which makes a drug for a rare, genetic muscular dystrophy disease.

Last month the BioMarin bonds gained on rumors of buyout interest from Sanofi as a backup if the French drug company’s takeover bid for Medivation failed.

EZCorp Inc.’s convertibles were higher after news that the Austin, Texas-based pawn store operator is selling assets. It has entered into a definitive agreement to sell Prestaciones Finmart SAPI DE CV, Sofom ENR to Alpha Holding SA de CV, in the Mexico and Colombia consumer lending markets.

EZCorp’s 2.125% convertibles due 2019 traded at 87.8 and also at 88 and 88.25, which was up from 83.75 on Wednesday and up from about 77 at the end of June.

Wells Fargo Securities put out an upgrade to outperform rating on EZCorp, with a $10.00 per share price target.

EZCorp shares ended the session up $1.26, or 16.5%, to $8.90.

“There was a little bit of momentum from that; but it’s a pretty illiquid name,” so it didn’t affect many people who weren’t already in the name, a trader said of EZCorp.

Moving in the opposite direction, Tesla Motors Inc.’s 1.5% convertibles, or the old bonds, were “trading horrible,” a sellsider said.

The Tesla bond was quoted at 2.875 points below parity on Thursday, which was down from about 1 point less than parity last week.

“Borrow is too tough to fund this trade,” the sellsider said.

A second source said, “There are different dynamics pulling [Tesla] in different ways. Given the short interest, it is one of the more difficult names to short, and there has been a lot of news out in the name.”

Overall, there were a variety of convertibles issues in trade on Thursday but few other standouts as volume was light, sources said.

Typically, dealings are lighter ahead of certain news events like a Federal Reserve policy statement or the U.S. Labor Department’s monthly jobs report. The June U.S. jobs report is set to be released early Friday. But this week’s quiet tone was due to the holiday weekend and summer holiday schedules rather than the jobs report more likely than not, a New York-based trader said.

Job creation in April and May was weak, with just 38,000 jobs added to payrolls in May, according to the Labor Department. So market players will be watching on Friday to see if there is a third straight weak reading or if there is a rebound in hiring.

In the broader markets, oil turned sharply lower after solid gains earlier in the week. Driving the sell-off was the crude inventory report that revealed a smaller-than-expected drawdown of supply, sources said.

Equities also pared early gains, ending mostly lower, although the Nasdaq stock market eked out a gain. The Nasdaq was up 17.65 points, or 0.4%, to 4,876.81. But the Dow Jones industrial average closed down 22.74 points, or 0.1%, to 17,895.88 and the S&P 500 stock index slipped 1.83 points, or 0.09%, to 2,097.90.

Weatherford expands

Weatherford’s $1.1 billion of 5.875% exchangeables, which debuted in the market in early June, were quoted at 108.75, which was up 0.75 point on a dollar-neutral basis, a New York-based trader said. Weatherford shares, which had been sporting healthy gains at the beginning of the session, closed down 2 cents to $5.41.

“Weatherford was the most traded name of the day: it held in there, and the bond is one of the bigger issues and has been doing well,” a trader said.

Meanwhile, crude oil prices fell to a two-month low amid renewed concerns of oversupply.

BioMarin expands

BioMarin Pharmaceuticals’ 1.5% convertible notes due 2020 traded up to 122.5 on Thursday, according to Trace data, and was higher on swap by 0.5 point, a New York-based sellsider said.

BioMarin’s 0.75% convertibles due 2018 traded at 119.3, which was up 6.16 points outright and higher by a full point on swap, the trader said.

The BioMarin 1.875% convertibles were indicated up to 430.5 from 395.3.

BioMarin shares jumped $7.35, or 9%, to $88.16 in heavy volume.

Takeover speculation was again driving this company’s securities higher. It was unclear whether a formal offer had been made, sources told Betaville, a British financial blog.

Mentioned in this article:

BioMarin Pharmaceuticals Inc. Nasdaq: BMRN

EZCorp. Inc. Nasdaq: EZPW

Weatherford International plc NYSE: WFT

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