Morning Commentary: Herbalife bonds, equity push higher on news of federal settlement deal

By Stephanie N. Rotondo

Seattle, July 15 – Convertible bond investors were focusing on Herbalife Ltd. on Friday after it was announced the company had reached a settlement with federal regulators over its business operations.

“That’s the only thing trading, because of the news,” a trader said.

He noted that the stock was up “like $10 bucks,” as the 2% convertible notes due 2019 traded as high as 108.

For the bonds, that was a gain of about 3 points. The equity was seeing well-above average trading as of mid-morning.

The multinational nutritional supplements company was being investigated over allegations that it was a pyramid scheme.

Activist investor Bill Ackman was one such critic, reiterating his views on the company on Thursday, just one day before the settlement was announced.

Under the terms of the settlement, Herbalife will pay $200 million to the government. It will avoid being labeled a pyramid scheme but must restructure its U.S. operations by altering the way it compensates its Salesforce.

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