Convertibles quiet again; Ares Capital, Intel trade early; SunEdison shares tank

By Rebecca Melvin

New York, Dec. 22 – U.S. convertibles were mostly quiet again on Tuesday with Ares Capital Corp. and Intel Corp.’s among the few names that were seen changing hands as the holiday-shortened week progressed, market players said.

Financial markets are closed for Christmas on Friday.

Ares Capital’s 5.75% convertibles due 2016 were little changed at 100, as were Ares Capital’s 5.125% convertibles due 2016, according to Trace data.

Intel’s 3.25% convertibles due 2039 traded at 167. 25, which was up 1.4 points on an outright basis, and Intel’s 2.95% convertibles due 2035 traded at 128.9, which was up a point, according to Trace data.

The paper of both issuers are among the more liquid, more money-market issues in the space.

SunEdison Inc.’s convertibles were indicated sharply lower in tandem with a drop in the common shares of the renewable energy company, which underlie the convertibles.

The SunEdison securities tanked after hedge fund manager David Tepper, whose firm Appaloosa Management LP owns a 9.5% stake in SunEdison subsidiary TerraForm Power Inc., filed a request with regulators to see certain documents of TerraForm. Tepper recently questioned SunEdison’s relationship with TerraForm, which SunEdison spun off into a yieldco.

SunEdison announced earlier this month that TerraForm would pay about $799 million to acquire Vivint Solar Inc., which was lower than the initial purchase price of $922 million, according to news reports.

SunEdison has priced four new issues in the convertibles market this year and has another three, older convertible issues. This year’s SunEdison issuance totals about $2 billion.

SunEdison’s $400 million of 2.375% convertibles due 2022, which priced in January, were indicated down to 40.4 from 46 previously, according to a market source.

SunEdison’s $440 million of 2.625% senior note due 2023 were indicated down to 39.6 from 43. SunEdison also priced a 3.375% senior note due 2025 at the same time in May, but those notes were not heard in trade.

SunEdison’s $650 million of 6.75% perpetual convertible preferreds were indicated down to $359.45 from $426.77.

SunEdison’s shares fell $1.43, or 21%, to $5.31 in heavy volume.

Other solar names were also lower on Tuesday, including SolarCity Corp.

SolarCity’s 2.75% convertibles due 2018 fell below par to 97 from 101.5 to 102 previously. SolarCity shares fell $3.77, or 7%, at $51.32.

SolarCity also has a 1.625% convertible due 2019, but pricing was not immediately available in those bonds.

Most energy names were also quiet after dropping in the previous few sessions.

Cobalt International Energy Inc.’s convertibles were not in trade after dropping on Monday.

Cobalt 2.625% convertibles were seen unchanged at 56 bid, 57 offered, and Cobalt’s 3.125% convertibles due 2024 were last at 52.25.

“Those have been down a lot. But it’s across the board. These names are down 10 points to 20 points in the last month,” the trader said.

The Kinder Morgan Inc. mandatories, which represent one of the best deals of 2015, were up 14 cents at $39.46, versus the underlying shares, which were up 1.2%, at $15.32 at the close.

Holders of the Kinder Morgan mandatories made about 8 points on the paper on a swap basis when the oil and gas company cut its dividend by 75%.

Mentioned in this article:

Ares Capital Corp. Nasdaq: ARCC

Cobalt International Energy Inc. NYSE: CIE

Intel Corp. Nasdaq: INTC

Kinder Morgan Inc. NYSE: KMI

SolarCity Corp. Nasdaq: SCTY

SunEdison Inc. Nasdaq: SUNE

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