Tech names active in trade; Quantum cracks; Altas Air trades at 97.9; WPX Energy on tap

By Rebecca Melvin

New York, July 16 – Several tech names were active in the U.S. convertibles market on Thursday after Intel Corp. posted better-than-expected earnings and as LinkedIn Corp. continued to trade better following upgrade news on Wednesday.

Intel’s 2.95% convertibles bumped around in tandem with the underlying shares of the Santa Clara. Calif.-based chipmaker but traded late at 118.55 with shares up 0.7% to $29.90.

Intel’s earnings and revenue were better than expected as growth in its data centers and internet-of-things businesses helped compensate for weak PC demand.

LinkedIn’s 0.5% convertibles due 2019 traded at 103.58 early Thursday, according to Trace data, which was up from 103 bid, 103.125 offered at the end of Wednesday. Shares were up about 0.5%.

Quantum Corp.’s 4.5% convertibles due 2017 tanked in tandem with a 23% plunge in the underlying shares of the San Jose, Calif.-based data storage provider on an earnings warning. The company said its results were hurt by weakness in the general-purpose storage market.

Quantum’s convertibles fell to about 104.35 from about 121.5 as shares slid 23% to $1.31, according to a market source.

Another issue trading Thursday was Atlas Air Worldwide Holdings Inc.’s 2.25% convertibles, which added more than half a point on an outright basis versus lower shares. The bonds changed hands late in the session at 97.9, which was up 0.625 point on the day.

Shares of the Purchase, N.Y.-based outsourced aircraft and aviation operating services company closed down 13 cents, or 0.25%, at $51.88. The company is slated to post its earnings on July 30. It priced $200 million of the 2.25% convertibles due 2022 in May.

WPX Energy Inc. was set to price its mandatory convertibles after the market close on Thursday, and the deal looked cheap for investors, according to a market source.

The Tulsa, Okla.-based natural gas and oil exploration and production company planned to price $300 million of convertible preferred shares, together with $1.2 billion of straight notes and 27 million shares of common stock, to help fund its acquisition of RKI Exploration and Production LLC. The deal was launched on Tuesday for pricing late Thursday.

But the deal was coming amidst a weak energy tape. The convertibles of energy E&P and coal companies were down by about a point on a swap basis on Thursday in the convertibles market, a New York-based trader said.

Denver-based E&P company Whiting Petroleum Corp.’s convertibles traded off 2.6 points on an outright basis by late morning to 101.43 against shares that were down 6%.

Another Denver-based E&P company, Emerald Oil Inc., saw its shares follow suit, closing down 16 cents, or 5.46%, to $2.79. The Emerald Oil 2% convertibles due 2019, which have been trading distressed for some time, were not heard in trade, but one source said he thought the market for those bonds was 40 bid, 45 offered.

Meanwhile the convertibles of coal company Alpha Natural Resources Inc. were trading amidst investor angst regarding whether the bonds will be paid out when due on Aug. 1. The ANR bonds were trading around 20, a New York-based trader said toward the end of the session.

“People are wondering is ANR going to make the payment,” the trader said.

Overall trading was described as “pretty quiet,” however.

It’s summer and the Greek situation is not in the rear view mirror yet, the trader said.

Outright convertibles players who had been largely sitting out the market during the Greek debt crisis had been expected to step back in on Thursday following a positive Greece parliamentary vote, but while volume was higher in the convertible secondary market, it was still not full force.

“There is still tremendous uncertainty over Greece. Look at the political stalemate; there is no real desire to implement the deal that they have,” a trader said.

While it was good news that the European Central Bank approved an increase in emergency funds for Greece, the action was not expected to alleviate the real banking pains that the country is suffering.

“They still have not solved the issue of capital flight, and what they are going to do when they reopen the banks,” the trader said.

There is no real conviction, he said.

WPX mandatory on tap

WPX Energy, the Tulsa, Okla.-based E&P company, announced on Tuesday that it was acquiring privately held RKI Exploration and Production LLC through a financing package including the $300 million of converts, $1.2 billion of senior notes and equity.

The purchase will mark WPX’s entrance into the Delaware sub-basin of the Permian Basin and will accelerate a shift in its production mix to crude oil, Gimme Credit’s Philip Adams wrote in a note published Thursday.

Gimme Credit is an independent credit research firm. The note said that the acquisition brings existing production and “tremendous upside,” as a world-class stacked oil play in a core location. With a lot of caveats regarding oil prices, expected to remain low for the next year, Adams said “a strategic acquisition partially financed by equity, supported by additional common equity and preferred stock, with a focus on deleveraging has a shot at success.”

Barclays is the bookrunning manager of the mandatory deal, which has a $45 million greenshoe.

The company is also pricing $1.2 billion of straight notes and 27 million shares of common stock. All of the deals are being made by means of separate prospectus supplements under WPX’s effective shelf registration statement.

Pricing was expected to occur late Thursday.

Mentioned in this article:

Alpha Natural Resources Inc. NYSE: ANR

Atlas Air Worldwide Holdings Inc. Nasdaq: AAWW

Emerald Oil Co. NYSE: EOX

Intel Corp. Nasdaq: INTC

LinkedIn Corp. Nasdaq: LNKD

Quantum Corp. NYSE: QTM

Whiting Petroleum Corp. NYSE: WLL

WPX Energy Inc. NYSE: WPX

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