Intel trades in line on numbers; Oasis Petroleum active; Great Plains Energy lists on NYSE

By Stephanie N. Rotondo

Seattle, Oct. 18 – The convertible bond market saw activity in spots on Tuesday as the start of earnings season kept investors preoccupied.

“All in all, it was a pretty uneventful day of trading as we start to enter earnings season,” one trader remarked.

As such, it was no surprise that Intel Corp.’s convertibles were active, as the Santa Clara, Calif.-based chip manufacturer released its third-quarter results.

A trader said the name was “busy ahead of earnings,” with both the 2.95% convertible notes due 2035 and the 3.25% convertible notes due 2039 trading “in line.”

“Earnings were a bit light on the [earnings per share] front,” he said.

Another market source placed the 2.95% convertibles just south of 139, which was down from the intraday high near 140 but still up 2 to 2.5 points outright. The 3.25% convertibles were similarly better, ending at 183.5.

The stock underlying the debt was meantime up 46 cents, or 1.23%, at $37.75.

For the quarter, Intel reported a profit of $3.4 billion, or 69 cents per share. That compared to a profit of $3.1 billion, or 64 cents per share, the year before.

On an adjusted basis, profit was $3.9 billion, or 80 cents per share.

Revenue improved 9% to $15.8 billion.

Analysts polled by FactSet had forecast adjusted EPS of 73 cents on revenue of $15.6 billion.

However, the company did warn that it was facing up to $2.3 billion in restructuring and other charges, with about $250 million expected in the fourth quarter.

Away from earnings, a trader noted that Illumina Inc. was being eyed again as a potential takeover target.

That buzz resulted in the company’s equity trading up as much as 5.5% before “selling off a bit.”

As for the company’s convertibles, they were little changed.

Oasis sells stock

Oasis Petroleum Inc.’s convertible bonds were trading actively as the Houston-based oil and gas producer priced a $518.4 million offering of common stock.

Ahead of pricing, a trader placed the 2.625% convertible notes due 2023 at 112.82 against a stock price of $10.98.

At that level, the equity was down about 2% for the day.

Later in the session, the trader said there was “lots of volume” in the name, pegging the convertibles at 112.5 versus a share price of $10.83.

After the deal priced, the common stock fell 66 cents, or 5.88%, to $10.57.

Oasis initially said it would sell 40 million shares of common stock. But a trader said he was hearing the common stock sale was upsized to 48 million shares – it was – with pricing expected around $10.80 per share.

The trader also noted that the convertibles were trading at a 75% delta.

The stock sale also includes a 7.2 million share over-allotment option.

The deal is expected to close Oct. 21.

Proceeds from the offering will be used to fund the acquisition of SM Energy’s Bakken assets, as well as for general corporate purposes, including the 2017 capital expenditure program.

Great Plains Energy lists

Great Plains Energy Inc.’s $750 million of 7% $50-par series B mandatory convertible preferreds began trading on the New York Stock Exchange on Tuesday.

The ticker symbol is “GXPPB.” The deal came Sept. 27 with an initial conversion premium of 20%, compared to the 17.5% to 22.5% talk. The yield priced at the tight end of the 7% to 7.5% talk.

Paper was trading at $51.40 at mid-morning, down from $51.50 at the open.

The preferreds are convertible at a threshold appreciation price of $31.74.

Holders of the preferreds can also elect to convert the securities early upon a fundamental change. In such a case, holders will receive a make-whole premium amount calculated using a 4.25% discount rate on top of the initial conversion rate.

Kansas City, Mo.-based Great Plains is the holding company of Kansas City Power & Light Co. and KCP&L Greater Missouri Operations Co.

Mentioned in this article:

Great Plains Energy Inc. NYSE: GXP

Intel Corp. Nasdaq: INTC

Oasis Petroleum Corp. NYSE: OAS

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