Wayfair convertibles eyed; Booking Holdings active; AMAG drops; Chesapeake in focus

By Abigail W. Adams

Portland, Me., Nov. 1 – The convertible secondary space again saw active trading on Thursday with convertibles issuers continuing to see large stock moves post earnings and accounts tying up end of the month business.

The convertibles primary market stands poised for its second consecutive week with no new deal activity, partly due to an earnings season blackout and partly due to market conditions.

Potential issuers may also be holding back to see the outcome of the mid-term elections and the impact they will have on the business climate, a market source said.

All eyes will be on the first issuer to step forward to see what pricing will look like in the current market environment. Market players expect it to widen.

Meanwhile, the secondary space saw more than $105 million on the tape a little over one hour into the session and $419 million on the tape by the late afternoon.

Wayfair Inc.’s 0.375% convertible notes due 2022 were in focus with the notes dropping outright but seeing gains on a dollar-neutral, or hedged, basis as stock tanked after the company reported third-quarter earnings.

Booking Holdings Inc.’s convertible notes continued to lead the volume charts, although focus shifted on Thursday to the company’s 0.9% convertible notes due 2021 from the 0.35% convertibles.

AMAG Pharmaceuticals Inc.’s 3.25% convertible notes due 2022 dropped on an outright and dollar-neutral basis as stock tanked after its third-quarter earnings report.

Energy sector names continued to see active trading after a rough week for crude oil futures.

Weatherford International Ltd.’s 5.875% convertible notes due 2021 were again volume movers in the space with the notes giving back some of the previous day’s gains on an outright basis.

Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 improved slightly on an outright basis after its low from earlier in the week.

Wayfair’s earnings

Wayfair’s 0.375% convertible notes due 2022 saw a slight dollar-neutral expansion as the notes dropped more than 12 points outright.

The notes traded as low as 110.625 early Thursday. They were seen changing hands at 112.5 versus an equity price of $95.33 later in the afternoon.

They were improved about 0.375 point dollar-neutral on a 70% hedge, a market source said.

More than $20 million of the bonds were on the tape by late Thursday.

Wayfair stock traded as low as $90.09 before closing Thursday at $96.16, a decrease of 12.81%.

Wayfair stock plummeted after the company reported a loss per share of $1.28 versus analyst expectations for a loss per share of $1.09.

While the company missed on its bottom line, revenue beat expectations.

Wayfair reported revenue of $1.71 billion in the third quarter versus analyst expectations for revenue of $1.67 billion.

Booking active

Booking Holdings’ convertible notes continued to lead the volume charts, although focus shifted on Thursday to the company’s 0.9% convertible notes due 2021 from the 0.35% convertibles.

The notes were trading just shy of 116 with $17 million of the bonds on the tape early in the session, a market source said.

They were seen changing hands at 116.5 versus an equity price of $1,893.16 in the late afternoon.

More than $24 million of the bonds changed hands on Thursday.

Booking stock closed Thursday at $1,894.27, an increase of 1.05%.

Booking’s 0.35% convertible notes due 2020 saw high-volume activity on Wednesday, although the notes were not active early Thursday.

The trading activity was attributed to end of the month portfolio adjustments.

AMAG drops

AMAG Pharmaceuticals’ 3.25% convertible notes due 2022 were dropping on an outright and dollar-neutral basis as stock sold-off following the company’s third-quarter earnings.

The 3.25% notes dropped more than 10 points outright to trade below par. They were seen changing hands at 97.5 versus an equity price of $17.84.

The notes were contracted about 0.5 point dollar-neutral, a market source said.

More than $12 million of the bonds changed hands during Thursday’s session.

After dropping as low as $16.90 during Thursday’s session, AMAG stock closed the day at $18.76, a decrease of 12.74%.

While the notes were down on Thursday, they have a nice coupon and were trading with a good yield, a market source said.

AMAG reported a loss per share of 77 cents, which was in line with analyst expectations.

AMAG beat analyst expectations with revenue of $122.2 million versus consensus estimates of $117.7 million.

While the earnings appeared OK at first glance, stock sold off based on weak forward guidance, a market source said.

Energy

Energy convertibles remained in focus in the secondary space after a sell-off earlier in the week.

After a rebound on Wednesday, Weatherford’s 5.875% convertible notes due 2021 gave back some of their gains on an outright basis although they were largely moving in line dollar-neutral, a market source said.

They were seen down about 1.25 points outright to trade at 76.25 versus an equity price of $1.28.

More than $13 million of the bonds were on the tape by late afternoon.

Weatherford stock closed Thursday at $1.34, a decrease of 0.74%.

The notes were down about 10 points dollar-neutral on Monday and Tuesday after the company announced third-quarter earnings.

However, they regained a couple points during Wednesday’s session, a market source said.

Chesapeake Energy’s 5.5% convertible notes due 2026 were up about 1 point outright on Thursday.

The notes were seen changing hands at 95.25 versus an equity price of $3.53.

Chesapeake stock closed Thursday at $3.57, an increase of 1.71%.

The 5.5% notes dropped about 5.5 points outright as stock fell more than 12% on Tuesday after Chesapeake announced it would acquire WildHorse Resource Development in a cash and stock transaction valued at $4 billion.

Stock received a bump on Thursday after Raymond James analysts upgraded Chesapeake to outperform from underperform as a result of the acquisition.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

Booking Holdings Inc. Nasdaq: BKNG

Chesapeake Energy Corp. NYSE: CHK

Wayfair Inc. NYSE: W

Weatherford International Ltd. NYSE: WFT

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