Spirit Realty active at higher levels on the back of S&P upgrade; Lam Research slips

By Rebecca Melvin

New York, April 25 – Spirit Realty Capital Inc.’s two convertibles remained a centerpiece of trade on Monday as market players continued to react to the Standard & Poor’s corporate credit rating upgrade of the Scottsdale, Ariz.-based real estate investment trust on Friday, market sources said.

S&P upgraded its corporate credit rating on Spirit Realty to BBB- from BB+, saying the upgrade primarily reflected the REIT’s recently upsized equity issuance, which resulted in net proceeds of $369 million.

The new equity modestly lowered leverage and is also expected to accelerate the pace of unencumbering the company’s asset base.

Spirit Realty’s 2.875% convertibles due 2019 were trading actively at 103, which was steady compared to Friday’s level, which jumped 2.5 points on the news.

Spirit Realty’s 3.75% convertibles due 2020 were at 105, which was up 3.5 points from Thursday.

Spirit Realty shares ended fractionally higher by 0.6% to $11.24.

Overall the convertibles market was pretty quiet, but the Spirit Realty A and B tranches were trading “on the back of the SPX upgrade to IG on Friday,” a New York-based trader said.

A second New York-based trader agreed, saying that it was likely that activity in the Spirit Realty tranches remained strong because market players were “still positioning themselves” after a slow Friday.

Lam Research Corp.’s 0.5% convertibles, which mature next month, traded lower to about 131, which was off 1.6 points on the day, according to Trace data. Shares of the Fremont, Calif.-based semiconductor manufacturing equipment maker were off 43 cents, or 0.5%, to $80.22.

Lam Research’s 2.625% convertibles due 2041 traded at 237.4, which was off a point.

Tesla Motors Inc.’s 0.25% convertibles due 2019 traded a bit stronger on Monday to 96.375 as Tesla shares slipped after Goldman Sachs raised its price target on the electric-car maker’s shares, citing upside potential from the large reservation numbers that came in for the company’s upcoming Model 3 electric sedan car, but lifted the target only to $245.00 from $202.00, which was below the current price of shares on Monday for the Palo Alto, Calif.-based electric car maker.

Twitter Inc.’s 0.25% convertibles due 2019 traded at 87.5, which was little changed on the day, and Priceline Group Inc.’s 0.35% convertibles due 2020 were off nearly a point at 122.

The convertibles market remains focused on earnings reports this week, although there were little by way of results posted on Monday. Also the market is gearing up for a Federal Open Market Committee meeting, which is slated to begin Tuesday. Market players don’t anticipate a rate raise coming out of this month’s meeting, but they will be poised to glean details of the Fed’s position on policy going forward when the FOMC statement is released on Wednesday following the two-day meeting.

Equities traded fractionally lower on light volume on Monday amid lower oil prices. The S&P 500 stock index closed down 3.79 points, or 0.2%, at 2,087.79; the Dow Jones industrial average closed down 26.51 points, or 0.2%, at 17,977.24 and the Nasdaq stock index lost 10.44 points, or 0.2%, to 4,895.79.

Mentioned in this article:

Lam Research Corp. Nasdaq: LRCX

Priceline Group Inc. Nasdaq: PCLN

Spirit Realty Corp. NYSE: SRC

Tesla Motors Inc. Nasdaq: TSLA

Twitter Inc. Nasdaq: TWTR

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