Enphase convertible notes improve; DexCom declines; Akamai active; Avaya in trouble

By Abigail W. Adams

Portland, Me., July 29 – The convertibles secondary space stood poised to close July on firm footing with returns positive for the month after a brutal first half of the year.

Equity indexes extended their gains on Friday with markets surging in July as the market repriced its expectations for the Federal Reserve rate hike schedule and its recession scenarios.

The Dow Jones industrial average closed Friday up 316 points, or 0.97%, the S&P 500 index closed up 1.42%, the Nasdaq Composite index closed up 1.88% and the Russell 2000 index closed up 0.65%.

The SPDR Bloomberg Convertible Securities ETF notched a 5.28% return in July. However, returns are still negative 17.7% year to date.

And while equity indexes saw their largest single month gains since 2020, the convertibles primary market remained dormant with no deals pricing.

It was the first July since at least 2001 that no deals have priced in the convertibles market, according to the Prospect News database.

“Issuers are going to have to bite the bullet and come in with cheaper terms, but no one wants to sell with stocks where they are, so things are at a standstill,” a source said.

With no new paper, trading activity has been anemic with Friday marking another quiet session.

There was $46 million in reported volume about one hour into the session and $392 million on the tape about one hour before the market close.

Enphase Energy Inc.’s convertible notes continued to post gains in active trading with strong earnings and renewed congressional support for an energy bill fueling a stock surge.

DexCom Inc.’s deep-in-the-money, short-duration 0.75% convertible notes due Dec. 1, 2023 fell alongside stock after an earnings disappointment.

Akamai Technologies Inc.’s 0.125% convertible notes due 2025 saw high-volume activity with the company the recent subject of takeover speculation.

While the overall market was strong, Avaya Holdings Corp.’s 2.25% convertible notes due June 15, 2023, bonds that recently surged after a series of refinancing transactions, plummeted with bankruptcy concern strong following a preliminary earnings release.

Enphase gains continue

Enphase’s convertible notes continued their upward momentum on Friday with the notes posting strong outright and dollar-neutral gains over the past three sessions.

The 0% convertible notes due 2026 rose another 4.5 points outright as stock extended its gains.

The notes were seen at 119.125 versus a stock price of $280.10 early in the session.

They traded at 120.625 versus a stock price of $286.73 in the late afternoon.

There was $10 million in reported volume for the day.

Enphase’s 0% convertible notes due 2028 gained 5 points outright.

They were changing hands at 125.25 versus a stock price of $285.82 in the late afternoon.

Enphase’s stock traded to a high of $287.38 and a low of $267.50 before closing the day at $284.18, an increase of 3.65%.

DexCom down

DexCom’s deep-in-the-money, short-duration 0.75% convertible notes due Dec. 1, 2023 sank alongside stock after an earnings disappointment.

The 0.75% notes fell almost 12 points outright with stock off more than 5%.

They were trading at 200.875 versus a stock price of $79.60 early in the session.

The notes changed hands at 202 versus a stock price of $81.36 in the late afternoon.

There was $5 million in reported volume.

DexCom’s stock traded to a high of $85.86 and a low of $77.51 before closing the day at $82.08, an increase of 5.64%.

The medical device company posted disappointing numbers with earnings of 17 cents versus expectations for 19 cents and revenue of $696.20 million versus expectations for revenue of $708.61 million.

Akamai active

Akamai’s 0.125% convertible notes due 2025 were slightly stronger outright in heavy volume on Friday.

The notes rose about 1 point outright with stock up 1.5%.

They were changing hands at 114.75 versus a stock price of $95.91 in the late afternoon.

There was $16.5 million in reported volume, making the issue one of the most actively traded of the day.

Akamai’s stock traded to a high of $96.68 and a low of $94.42 before closing the day at $96.22, an increase of 1.73%.

The cybersecurity and cloud service company recently became the subject of takeover speculation with news circulating last week a private equity firm was attempting to arrange financing for a takeover bid.

Avaya in trouble

Avaya’s 2.25% convertibles due June 15, 2023 plummeted on Friday with preliminary financial results reawakening bankruptcy fears that a series of recent refinancing transactions had eliminated.

The 2.25% convertible notes sank 40 points outright to a new historic low.

The notes closed Friday at 55 after previously trading at 95, a source said.

The notes’ previous all-time low was 77, to which they sank in late May as investors questioned the ability of the company to repay the notes at their fast-approaching maturity.

However, those fears were largely eliminated after the technology company completed a series of capital raises to refinance the notes.

Avaya recently priced $350 million in new senior secured term loans and privately placed $250 million in 8% exchangeable notes due 2027 with proceeds to be used in part to prefund the payment of the 2.25% convertible notes at their maturity.

The refinancing sent the convertible notes soaring off their lows with the notes leveling off at 95.

A portion of proceeds were used to repurchase $129 million of the 2.25% convertible notes in the secondary market.

However, bankruptcy fears were reignited after the company released preliminary earnings results.

Revenue is now expected to be between $575 million to $580 million from their previously downwardly revised forecast for $685 million to $700 million.

Adjusted EBITDA is now expected to be $50 million to $55 million from previous guidance of $140 million to $150 million.

The company also announced a leadership shake-up with the CEO replaced.

Avaya’s initial downward revision to its quarterly revenue forecast in May caused the convertible notes to plummet to their previous all-time low.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Avaya Holdings Corp. NYSE: AVYA

DexCom Inc. Nasdaq: DXCM

Enphase Energy Inc. Nasdaq: ENPH

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