Ensco convertible notes eyed as crude oil futures bounce; Medicines sees large seller

By Abigail W. Adams

Portland, Me., Jan. 4 – The convertibles secondary space closed the week on strong footing as equities surged following a strong jobs report and statements from Federal Reserve chairman Jerome Powell.

The Dow Jones industrial average closed the day up 746 points, the Nasdaq closed the day up 4.26% and the S&P 500 closed the day up 3.43%.

In stark contrast to the selling pressure of previous weeks, buyers were reentering the space with names that have not traded since the fourth-quarter sell-off began starting to catch a bid, a market source said.

The energy sector stood out as an outperformer as crude oil futures jumped alongside equities.

Ensco plc’s 3% convertible notes due 2024 topped the volume charts with the notes jumping more than 2 points.

Square Inc.’s 0.5% convertible notes due 2023 were active as stock surged during Friday’s session.

Jazz Pharmaceuticals plc’s 1.5% convertible notes due 2024 were also active on news of a new partnership with Codiak BioSciences for a cancer treatment.

Medicines Co.’s 2.75% convertible notes due 2023 saw a large seller in the market after hours on Thursday with $90 million of the bonds sold.

The 2.75% notes saw a significant dollar-neutral drop since the pharmaceutical company priced its 3.5% convertible notes due 2023 on Dec. 13.

The 3.5% convertible notes also saw a fresh round of trading activity on Friday. While the notes were below par, they maintained a dollar-neutral expansion since pricing.

Ensco eyed

The first week of the new year closed out strongly with the energy sector among the major benefactors.

Ensco’s 3% convertible notes due 2024 continued to top the volume charts, as they had for much of the week.

The notes jumped 2.5 points outright to trade up to 72 with the yield 10.20%, a market source said.

About $8 million of the bonds were on the tape early in the session and about $12 million were on the tape by the late afternoon.

The notes are a yield play with the primary question being whether or not the company is viable, the source said.

Ensco has been under pressure with the 3% notes collapsing alongside crude oil futures in the fourth quarter of 2018. The notes closed 2018 at 64.75, the source said.

They were trading north of par prior to the sell-off in crude oil in mid-October.

However, the notes have been active and making gains throughout the week as crude oil futures rebounded.

The barrel price of WTI crude oil continued its upward momentum on Friday, jumping as much as 4% in intraday trading and settling at $48.31, an increase of $1.22 or 2.59%.

Square active

Square’s 0.5% convertible notes due 2023 were active and making gains on an outright basis as stock soared on Friday.

The notes were up more than 4 points outright to trade up to 106.75, according to a market source.

After trading as high as $59.66, Square stock closed Friday at $58.18, an increase of 10.99%.

Jazz’s partnership

Jazz Pharmaceuticals’ 1.5% convertible notes due 2024 were active and making gains on Friday. The notes rose about 2 points outright to trade up to 92, according to a market source.

Jazz stock closed Friday at $128.87, an increase of 2.2%.

The notes returned to focus on Friday after the company announced a strategic partnership with Codiak BioSciences, a market source said.

The collaboration will focus on the research, development and commercialization of exosome therapeutics to treat cancer with Jazz granted an exclusive license to develop drug candidates using Codiak’s platform, according to a company news release.

Selling Medicines

There was a large seller for Medicines’ 2.75% convertible notes due 2023 after the market close on Thursday, a market source said.

A single seller put $90 million of the bonds up for sale, the source said. There were at least 10 buyers, some of them hedge players.

The notes changed hands around 71.5 with the yield almost 11%, a market source said.

The 2.75% notes have been “bludgeoned” since Medicines priced its most recent convertible notes deal.

The 2.75% notes have come in 4.625 points dollar-neutral since Medicines’ 3.5% convertible notes hit the secondary space on Dec. 14.

The 3.5% convertible notes saw a fresh round of activity on Friday. The notes were trading around 97.75 and were moving in line dollar-neutral, a source said.

While below par, the 3.5% notes maintained a 0.5 point dollar-neutral expansion since they hit the market.

Medicines stock closed Friday at $18.61, an increase of 4.2%.

Mentioned in this article:

Ensco plc NYSE: ESV

Jazz Pharmaceuticals plc Nasdaq: JAZZ

Medicines Co. Nasdaq: MDCO

Square Inc. NYSE: SQ

© 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.