Morning Commentary: Ascent Capital launches tender; Integrated Device Technology eyed

By Abigail W. Adams

Portland, Me., Aug. 31 – Trading volume in the convertibles secondary space was higher than anticipated early in the session with $62 million on the tape. However, most of the activity was end of month shuffling of accounts, a market source said.

Integrated Device Technology Inc.’s 0.875% convertible notes due 2022 were in focus and shot up on an outright basis alongside the stock. The notes were trading around 137.375 with about $9 million on the tape, a market source said. Integrated Device stock jumped almost 10% early Friday to $41.62, a new 52-week high.

The convertible notes and stock were moving on news Renesas is in talks to acquire the semiconductor company.

Ascent Capital Group, Inc. has launched a tender offer for $63 million of the outstanding $96.78 million of its 4% convertible notes due 2022. The early tender offer of $645 per $1,000 principle is “a little kiss” for holders, a market source said.

The 4% notes last traded on Aug. 22 between 63.875 and 64.125. The top three holders of the notes own about 60% of the outstanding bonds, and the tender offer may have been negotiated with them prior to the announcement, the source said.

Since Ascent priced the 4% convertible notes in 2013, the company’s stock has tanked. The premium on the notes is over 2,000% and parity is about 23. Given the deep discount of the notes, there may have been some concern over the company’s ability to pay them back.

However, the tender offer will help to alleviate some of those concerns, the source said.

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