American Water exchangeables lower on bond move; Sarepta gains; Greenbriar outperforms

By Abigail W. Adams

Portland, Me., June 29 – The convertibles secondary space saw a steady stream of activity on Thursday as market players made end-of-quarter moves ahead of what is anticipated to be dead sessions on Friday and Monday.

The end-of-quarter activity comes as markets grapple with the latest wave of macro data that depict continued economic strength.

While recession fears have receded, markets continue to grapple with rate risk with a GDP print that exceeded expectations by a large margin, supporting future Fed rate increases.

Equity markets were mixed as Treasuries slumped, sending yields skyrocketing.

The Dow Jones industrial average closed Thursday up 270 points, or 0.80%, the S&P 500 index closed up 0.45%, the Nasdaq Composite index closed flat at 0% and the Russell 2000 index closed up 1.23%.

There was $75 million of convertibles trading on the tape about one hour into the session and $458 million about one hour before the market close.

American Water Capital Corp.’s 3.625% exchangeable notes due 2026 (Baa1/A-) remained active with the notes coming in alongside most investment-grade convertible notes from utility companies due to the move in Treasuries.

Sarepta Therapeutics Inc.’s 1.25% convertible notes due 2027 improved in active trade after tanking the previous week following the Food and Drug Administration’s ambiguous approval of its muscular dystrophy treatment.

Greenbrier Cos., Inc.’s 2.875% convertible notes due 2028 were the major gainers of Thursday’s session with the notes soaring outright and making strong dollar-neutral expansion on the way up.

American Water weaker

American Water’s new 3.625% exchangeable notes due 2026 were weaker in heavy volume with IG names across the board taking a hit on the move in Treasuries.

The 3.625% notes were changing hands at 100.25 versus a stock price of $140.82 in the late afternoon, according to a market source.

They contracted about 0.125 point dollar-neutral.

American Water’s stock traded to a low of $139.01 and a high of $141.49 before closing at $140.47, off 0.35%.

While the 3.625% notes expanded about 0.25 point dollar-neutral on their aftermarket debut on Tuesday, they have since given back most gains and are now flat dollar-neutral, sources said.

Thursday’s session was a rough one for credit with the sell-off in Treasuries pressuring IG-rated convertible notes.

The IG notes from utility companies were down 0.125 point to 0.25 point across the board on Thursday, a source said.

Sarepta improves

Sarepta’s 1.25% convertible notes due 2027 improved on an outright and dollar-neutral basis on Thursday after tanking the previous week following the FDA’s ambiguous approval of the biotech’s gene therapy treatment for muscular dystrophy.

The 1.25% notes were trading at 107 versus a stock price of $111.54 early in the session, according to a market source.

They continued to gain strength alongside stock and were seen at 108.125 versus a stock price of $114.64 in the late afternoon.

The notes gained about 0.25 point on swap.

Sarepta’s stock traded to a low of $110.99 and a high of $115 before closing at $112.24, up 0.29%.

Sarepta’s convertible notes and stock have been volatile over the past few months surrounding the FDA approval process for Elevidys, its muscular dystrophy treatment.

While stock fluctuated between gains and losses as the FDA approval process went through unexpected hurdles, the stock has nosedived since the drug was formally approved on June 22, due to a warning that kept approval of the treatment under a cloud of ambiguity.

While the FDA approved the treatment, it also issued a warning that it could withdraw its approval if the results of an ongoing Phase 3 trial were not positive.

Sarepta’s convertible notes were wrapped around 119 heading into June 22.

The notes fell 14 points outright and contracted 2.5 points dollar-neutral following the FDA’s decision.

Greenbrier outperforms

Greenbrier’s 2.875% convertible notes due 2028 were the major gainers of Thursday’s session with the notes skyrocketing outright and seeing a large dollar-neutral expansion post-earnings.

The 2.875% notes were up 12 points outright with stock up more than 30%.

The notes were trading at 97.5 versus a stock price of $42.17 in the late afternoon, according to a market source.

They expanded 2 points dollar-neutral.

Greenbrier’s stock traded to a low of $37.58 and a high of $42.88 before closing at $42.82, an increase of 31.83%.

Stock skyrocketed after the company reported strong earnings with earnings per share of $1.02 and revenue of $1 billion.

Mentioned in this article:

American Water Works Co. Inc. NYSE: AWK

Greenbrier Cos., Inc. NYSE: GBX

Sarepta Therapeutics Inc. Nasdaq: SRPT

© 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.