Convertibles mixed to weaker; Yahoo! lower outright, on hedge; Molina mixed; Herbalife up

By Rebecca Melvin

New York, Sept. 9 – A few issues trading actively in the convertibles market were weighed down with lower shares on Tuesday.

Yahoo! Inc.’s 0% convertibles moved lower on both an outright and dollar-neutral, or hedged, basis in active trade as shares slid amid headlines regarding the initial public offering of Alibaba Group, of which Yahoo currently owns a 22.5% stake.

Overall, the convertibles market was about 0.25 point lower, on average, a New York-based trader said.

But some active names were mixed, including Molina Healthcare Inc., which saw its new 1.625% convertibles add about 0.375 point on a dollar-neutral, or hedged, basis, but its 1.125 convertibles due 2020 slip by about 0.25 point, according to a New York-based trader, who said the names in his space were mixed overall.

Herbalife Ltd.’s 2% convertible notes due 2019 expanded on a dollar-neutral basis, however, as shares of the dietary supplement company fell.

Meanwhile, the primary market was quiet for the second straight session, which was surprising after last week’s burst of activity.

“Last week there were more than expected, and this week less than expected,” a New York-based sellsider said.

It wasn’t clear why the primary was quiet after four deals priced in the holiday-shortened week following Labor Day.

Equities were mostly lower with selling that accelerated into the close. Treasuries also eased, but the U.S. dollar was up.

With the strength of the dollar, gold and other commodities including miners have been under pressure, a New York-based trader said.

Newmont Mining Corp.’s 1.625% convertibles came in more than 1 point as a block seller pushed the bonds down Tuesday, the trader said.

Over the last seven trading days Newmont shares fell 5%.

The Newmont 1.625% convertibles were 104.25 bid, 105 offered versus a share price of $25.29 at late afternoon Tuesday, compared to 105.75 bid, 106.25 offered versus a share price of $25.29 at the open, a New York-based trader said.

But Depomed Inc.’s 2.5% convertibles, which debuted in the market last Thursday, traded up about 0.7 point on an outright basis to 102.41, according to Trace data, with the underlying shares of the Newark, Calif.-based specialty pharmaceutical company starting out lower but rising 1.1% on the day.

The stock markets moved lower. The S&P 500 stock index shed 13.10 points, or 0.7%, to 1,988.44; the Dow Jones industrial average fell 97.55 points, or 0.6%, to 17,013.87; and the Nasdaq Stock Market slid 40 points, or 0.9%, to 4,552.29.

Yahoo comes in

Yahoo 0% convertibles due 2018 traded late in the day at 104.62, which was down 1 point on an outright basis. Yahoo shares sagged $1.03, or 2.5%, to $40.78.

Earlier in the session the paper changed hands at 105.375 with the underlying shares at $41.81.

That was down on a dollar-neutral basis by about 0.375 point, a New York-based trader said.

“Yahoo weaker again as guys sell the news,” the trader said.

The news was that Alibaba, the Chinese e-commerce giant, which has talked about an initial public offering for about a year, started its global roadshow to raise more than $21 billion on Monday.

Price talk for the deal came out on Friday. Yahoo shares rose on Monday.

Alibaba plans to price the deal Sept. 18, with trading Sept. 19. The American Depositary Shares are expected to price between $60.00 per share and $66.00 per share. Yahoo is expected to sell a little more than 25% of its stake into the IPO.

Molina mixed

Molina’s 1.625% convertibles were trading around 105; the Molina 1.125% convertibles traded at 126, and the Molina 3.75% convertibles traded at 149.

Molina shares ended up 45 cents, or nearly 1%, at $46.99 on Tuesday. And a trader said the 1.625% convertibles were up 0.375 point on hedge, but the 1.125% convertibles were down about 0.25 point to 0.5 point.

Herbalife’s 2% convertibles due 2019, of which more than $1 billion was priced earlier this year, traded lower on an outright basis at 76 bid, 77 offered on Tuesday, but the bonds were up on a dollar-neutral, or hedged, basis by about 0.25 point to 0.5 point, a trader said.

Herbalife shares slid $2.28, or 4.7%, to $46.49 in heavier-than-average trading.

Mentioned in this article:

Herbalife Inc. NYSE: HLF

Molina Healthcare Inc. NYSE: MOH

Newmont Mining Corp. NYSE: NEM

Yahoo! Inc. Nasdaq: YHOO

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