Convertibles trading light; ServiceNow, Unisys reach new heights; Depomed notes active

By Abigail W. Adams

Portland, Me., Aug. 29 – After a jump in trading volume a day earlier, the convertibles secondary market was again quiet on Wednesday with activity expected to remain light for the remainder of the week.

All eyes will be on the primary market in the return from Labor Day with September expected to be a high-volume month for new deals, sources said.

While some deals are expected to materialize next week, “you never know until they arrive,” a market source said.

Meanwhile, stock moves were the impetus for trading activity in the secondary space on Wednesday.

ServiceNow Inc.’s 0% convertible notes due 2022 were active with the notes climbing on an outright basis as stock again broke out to a new 52-week high.

Unisys Corp.’s 5.5% convertible notes due 2021 were also active and making large outright gains as stock broke out to a new 52-week high.

Illumina Inc.’s 0% convertible notes due 2023 were again “a bright spot” in the secondary space with the notes continuing to gain on an outright basis.

The convertible notes of Assertio Therapeutics, Inc., formerly known as Depomed Inc., were active and dropping on an outright basis as stock fell as much as 20% in intraday trading.

The notes dipped back to their previous levels prior to a spike in July after the results of the pharmaceutical company’s patent suit against Purdue Pharma were announced.

ServiceNow’s new heights

ServiceNow’s 0% convertible notes due 2022 saw a flurry of trading activity on Wednesday as stock again broke out to a new 52-week high after a solid week of gains.

The convertible notes were largely wrapped around 150.5. The notes were quoted at market close at 152.58. They were trading with about 4 points of premium, a market source said.

While not as active, the soon-to-mature 0% convertible notes due Nov. 1, 2018 were quoted at 270.53 at market close, an increase of about 8 points on an outright basis.

ServiceNow stock again set a new 52-week high on Wednesday. The stock closed the day at $200.51, an increase of 3.22%.

The stock has seen upward momentum since Aug. 23 when ServiceNow and Box, Inc., both cloud services companies, announced they were integrating their platforms.

Tech companies continue to be the outperformers of 2018 with outright players the major benefactors from their growth, a market source said.

“Their performance has been incredible,” a market source said.

Unisys double par

Unisys’ 5.5% convertible note due 2021 is another issue in the tech sector to outperform.

The 5.5% convertible notes crossed into double par territory on Wednesday as stock also broke out to a new 52-week high.

The 5.5% convertible notes traded up to 201 during Wednesday’s session, according to Trace data. They were quoted at 198.80 at the market close, according to a market source.

Unisys stock closed Wednesday at $18.30, an increase of 9.25%.

Stock was trading up on news Unisys will join the S&P SmallCap 600 index, a market source said.

Illumina gains continue

Illumina’s new 0% convertible notes due 2023 continued to make gains on Wednesday with the notes up another 1.5 points on an outright basis.

The notes were seen at 109 bid, 109½ offered on Wednesday, according to a market source. They were largely trading in line dollar-neutral.

Illumina stock closed Wednesday at $350.63, an increase of 1.7%.

Despite pricing rich, the 0% notes have expanded about 6 points dollar-neutral since hitting the market on Aug. 16, sources said.

Demand for investment-grade paper and infatuation with the Illumina story have driven demand for the new notes.

Depomed’s settlement

Assertio’s 2.5% convertible notes due 2021 were in focus on Wednesday and trading down on an outright basis as stock slid as much as 20% in intra-day trading.

The notes were down about 3 points outright to trade between 82.25 and 82.75 during Wednesday’s session.

While the stock traded to a low of $5.96, it pared its losses into the afternoon and closed the day at $6.52, a decrease of 10.93%.

The activity came after the company announced it had settled its patent infringement case against Purdue Pharma related to Oxycontin. The settlement amount was $62 million to be doled out in two installments.

The amount was much less than anticipated, a market source said. “Most of that money would have been used for debt retirement,” the source said.

The company is top heavy with debt with $307 million in bank loans and $345 million outstanding in the 2.5% notes.

While the company has one or two generic drugs in its pipeline, it will be awhile before that translates to revenue, the source said.

The 2.5% notes are now approaching their previous levels prior to a spike in mid-July caused by optimism surrounding the settlement amount with Purdue.

The yield on the notes is once again about 9.5%.

Mentioned in this article:

Assertio Therapeutics, Inc. Nasdaq: ASRT

Illumina Inc. Nasdaq: ILMN

ServiceNow Inc. NYSE: NOW

Unisys Corp. NYSE: UIS

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