Convertibles trade quietly ahead of Labor Day weekend; Salesforce ‘comes in’ slightly

By Rebecca Melvin

New York, Sept. 1 – U.S. convertibles were trading quietly on Thursday on the first day of September and ahead of the Labor Day holiday weekend. Financial markets will be closed on Monday.

In addition market players were waiting on the U.S. payrolls report for August slated to be released early Friday.

“Basically, there’s nothing going on,” a New York-based trader said. But, he allowed, there was a little activity in some issues related to news that was also moving their underlying shares.

Salesforce.com Inc.’s 0.25% convertibles due 2018 were down outright and contracted slightly on a dollar-neutral, or swap, basis along with lower shares after the cloud software company reported a disappointing outlook amid a rise in revenue.

For its second-quarter, Salesforce swung to a profit on a 25% gain in revenue, but it gave a disappointing outlook for the current quarter, saying there was some softness in its U.S. markets.

The Salesforce 0.25% convertibles due 2018 traded at 124.25 against shares that dropped 6.5% to 7%, the trader said. On Wednesday, the Salesforce convertibles traded at 128.5 to 129.

The Salesforce shares recovered some ground from lower early trades on Thursday to close down only $3.51, or 4.4%, to $75.91.

In addition, there was still trading in Interactive Intelligence Group Inc.’s convertibles and in Liberty Interactive LLC’s debentures exchangeable for Charter Communications Inc., which moved up in active trade on Wednesday.

The Interactive 1.25% convertible due 2021 was trading a little off following a better than 2-point bump up on news Wednesday that it is being acquired by Genesys in a transaction valued at about $1.4 billion.

Under the terms of the agreement, Interactive shareholders will receive $60.50 per share in cash, representing a premium of 36% to Interactive’s closing share price on July 28, the day before media reports that Interactive was considering strategic alternatives. The transaction is expected to close by the end of the year, subject to typical approvals.

The Interactive 1.25% convertibles gained 2.2 points to 115.59 on Wednesday against a 7% climb in the underlying price of Interactive stock. On Thursday, the Interactive stock was up another 29 cents, or 0.5%, to $60.14, but the convertibles lagged a bit amid a general heaviness in convertibles.

Liberty/Charter’s 1.75% exchangeable due 2046 improved on news that Charter was added to the S&P 500 stock index after the market close on Wednesday. The Stamford, Conn.-based cable communications company is replacing EMC Corp., which is on track to be acquired by privately held PC maker Dell Corp.

Overall volume was light, with trading in different names “across the board,” a trader said.

In Europe, Inmarsat plc priced an upsized $650 million of seven-year convertible bonds at par to yield 3.875% with an initial conversion premium of 32.5%.

The Regulation S deal was sold via joint bookrunners Credit Suisse and JPMorgan and with BofA Merrill Lynch as a co-bookrunner. The deal was initially talked at $550 million in size with a $50 million greenshoe.

Pricing came toward the rich end of 3.625% to 4.125% coupon talk and at the midpoint of 30% to 35% premium talk.

In the broader markets, major stock indices closed little changed. The S&P 500 stock index ended virtually unchanged at 2,170.86. The Nasdaq Composite gained 13.99 points, or 0.3%, to 5,227.21, and the Dow Jones industrial average rose 18.42 points, or 0.1%, to 18,419.30.

The August jobs report expected to be released on Friday is an important data point that will factor into the Federal Reserve’s decision whether to lift interest rates when Fed policy makers meet later this month. Some economists are expecting a pretty robust jobs report, which will bolster growing opinion that the Fed may raise rates for the first time this year in September amid improving economic conditions.

Mentioned in this article:

Charter Communications Inc. Nasdaq: CHTR

Inmarsat plc London: ISAT

Interactive Intelligence Group Inc. Nasdaq: ININ

Salesforce.com Inc. NYSE: CRM

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.