Convertibles action slows ahead of holiday; Cemex better; Yahoo!, Intel slip on swap

By Rebecca Melvin

New York, May 22 – Cemex SAB de CV traded actively for a second straight session in U.S. convertibles on Friday after the Monterrey, Mexico-based cement producer agreed to exchange about $626 million of the Cemex 3.25% convertibles due 2016 for new 3.72% convertibles due 2020 plus shares.

The whole complex of Cemex convertibles was up, a New York-based trader said. On Thursday, the existing Cemex bonds traded better on a swap basis, but the new paper struggled.

Elsewhere, Yahoo! Inc. was in trade – as has been the case for much of the week – and the 0% convertibles due 2018 were flattish on an outright basis but lower on swap by about 0.5 point, a New York-based trader said.

Intel Corp.’s convertibles were also lower on swap, with the Intel issues mostly offered, a New York-based analyst said.

Ctrip.com International Ltd.’s convertibles jumped more than 10 points on an outright basis with shares of the Shanghai-based internet travel site up 17.5% after news that the company has taken a 37.6% stake in ELong Inc. for $400 million.

ELong is a mobile and online travel service provider in China, and the stake puts the two companies on more collaborative, rather than competitive, footing.

Ctrip’s 1.25% convertibles due 2018 traded as high as 129, which was up from 117 previously. Late in the day, it traded at 127.5 with shares at $84.50, which was up 17%.

In the broader markets, equities were also under a little bit of pressure ahead of the long holiday weekend for Memorial Day. The S&P 500 stock index and Dow Jones industrial average were down fractionally, but the Nasdaq stock exchange was up fractionally.

New comments from Federal Reserve chairwoman Janel Yellen added a little weight to markets as she said she still expects the economy to improve this year and for the central bank to begin to raise the Federal Funds rate before the end of the year, with a gradual pace of tightening thereafter.

The Fed chair, speaking at the Greater Providence Chamber of Commerce in Providence, Rhode Island, said that she expects a “moderate” pace of growth to resume following a disappointing first quarter and that “at some point this year,” the short-term interest rate would be lifted.

Pricing in convertibles was mostly sideways for the past week and liquidity was on the light side ahead of Memorial Day. There was an early close for the U.S. bond markets on Friday, and financial markets will remain closed on Monday.

For the week, there was one new deal in the primary market that dropped below par on its debut on Wednesday. Interactive Intelligence Group Inc.’s 1.25% convertibles traded down to a 98 handle after the Indianapolis-based communications software company priced $150 million of the five-year senior notes.

The issue was not the first deal to go south on its debut recently. Last week, SunEdison Inc.’s new 2.625% convertibles due 2023 were quoted lower on their debut at 99.625 bid, 100.125 offered versus an underlying share price that was up 0.77%. The longer-dated SunEdison tranche of the dual-tranche deal was a little higher, however.

For May so far, there have been seven new U.S. convertibles deals for a total of $2.38 billion in issuance. In addition to the two SunEdison tranches for $750 million, Cowen Group Inc. priced $105 million of 5.625% perpetual convertible preferreds, Anthem Inc. priced $1.25 billion of 5.25% mandatory convertible equity units, HeartWare International Inc. priced $84.2 million of 1.75% convertible bonds and New Source Energy Partners LP priced $1.76 million of 11% mandatory convertible preferreds.

Cemex improves

On Friday, the new Cemex 3.72% convertibles were up a little bit above par, a New York-based trader said. The Cemex As, or the 2016 bonds, were little changed at about 118.

Cemex exchanged the 2016 bonds for the new paper in privately negotiated transactions with some of the institutional investors. Cemex shares were last down by about 0.8% at $9.96 in low volume at that time.

The Cemex shares weakened into the close, ending down 27 cents, or 2.7%, at $9.77.

Both Cemex 3.25% convertibles, the A and B tranches, traded better on the exchange deal initially. They were up about 0.625 point on a hedged basis. But the new 3.72% convertibles due 2020 initially struggled, trading down 1.25 points post issue. But they recouped some ground and were last seen down about 0.75 point.

The company has offered to issue $321 million of new 3.72% convertibles at terms that are substantially the same as the existing 3.75% convertibles issued in March. Cemex is also offering about 42 million American Depositary Shares.

All the Cemex bonds were trading, a trader said Friday.

Yahoo! slips

The Yahoo! bonds were seen trading between 109.125 and 109.5, according to Trace data early Friday. Shares of the Sunnyvale, Calif.-based internet company were up 20 cents, or 0.5%, at $43.81 at late morning, and they closed down 19 cents, or 0.4%, to $43.49.

The bond has seen action all week. On Monday the paper was seen “mostly on the offer side,” but little changed. On Tuesday, the Yahoo! 0% convertibles came off several points at the end of the session along with a drop in the underlying shares after news regarding a possible U.S. tax rule change that could affect its planned spinoff of its Alibaba Holding Ltd. stake later this year.

With shares down $3.38, or 7.6%, to $40.98, the Yahoo! bonds dropped to 106. On Friday, the Yahoo! convertibles were said to have come in about 0.5 point.

Intel lower

The Intel 3.25% convertibles due 2039 were seen to have traded at 165.83, which was down 0.6 point on the day, according to Trace data.

Shares of the Santa Clara, Calif.-based chip maker were down 20 cents, or 0.6%, at $33.35 at that point. The stock ended down by a dime at $33.45.

A New York-based analyst said the Intel 3.25% convertibles due 2039 traded down 0.0625 point to 0.125 point on the day on swap and the Intel 2.95% convertibles due 2035 traded down about 0.25 point to 0.375 point.

“Intel shares were definitely lower today as they went offered,” the analyst said.

Mentioned in this article:

Anthem Inc. Nasdaq: ANTM

Cemex SAB de CV NYSE: CX

Cowen Group Inc. Nasdaq: COWN

Ctrip.com International Ltd. Nasdaq: CTRP

HeartWare International Inc. Nasdaq: HTWR

Intel Corp. Nasdaq: INTC

Interactive Intelligence Group Inc. Nasdaq: ININ

New Source Energy Partners LP Nasdaq: NSLP

SunEdison Inc. Nasdaq: SUNE

Yahoo! Inc. Nasdaq: YHOO

© 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.