Tesla adds on swap as shares pull higher; Omnicare flat; Echo Global Logistics launches

By Rebecca Melvin

New York, April 27 – Tesla Motors Inc. was a focus of trading action in U.S. convertibles on Monday in what was generally a low-volume day. The bonds of the Palo Alto, Calif.-based electric car maker gained on an outright basis and improved on swap as shares moved sharply higher following a positive note by Deutsche Bank, market sources said.

The bank said that Tesla’s electricity storage products may boost results more than expected. It has a “buy” rating and $245.00 price target on the shares.

Cemex SAB de CV remained active on at least one trading desk, and the convertibles of the Monterrey, Mexico-based cement maker were called “in line” with the underlying shares, which are stronger following last week’s narrower quarterly loss and positive comments on its domestic construction market.

Omnicare Inc. remained in trade following last week’s news that the Cincinnati-based pharmacy services provider is exploring a sale. On Friday, RBC Capital Markets downgraded the stock to “sector perform” from “outperform.” The older Omnicare 3.25% convertibles were unchanged on Monday from Friday after a bump up with shares on Thursday, a trader said.

Scorpio Tankers Inc.’s convertibles were quiet despite a move higher in the early going after Monaco-based company reported first-quarter earnings, a trader said.

In the primary market, Echo Global Logistics Inc. launched an offering of $150 million of five-year convertible senior notes ahead of the market open. The deal was seen pricing Wednesday.

The registered notes were talked to yield 2.75% to 3.25% with an initial conversion premium of 27.5% to 32.5%.

Otherwise the market was “pretty quiet,” with the lack of activity chalked up to the fact that it is a Monday. But the coming week brings a host of issuer earnings reports and month end.

In addition to earnings, there will be important economic data, including the first reading on first-quarter U.S. economic growth, consumer spending for March and the Federal Reserve’s preferred inflation gauge. The Federal Reserve will also provide a statement on monetary policy on Wednesday.

U.S. stocks gave up early gains to trade lower. The S&P 500 stock index shed 8.77 points, or 0.4%, to 2,108.92, and the Nasdaq composite index lost 31.84 points, or 0.6%, to 5,060.25.

Tesla up outright, on swap

A midsession market reversal in stocks didn’t seem to affect Tesla’s convertible bonds, which were seen better by about 0.5 point on swap on the day.

Tesla’s 1.25% convertible due 2021 were last seen at about 94 in the early going, which was up nearly 3 points on the day on an outright basis.

On a hedged basis, the Tesla convertibles were up about 0.5 point “across the board,” a New York-based trader said.

Tesla’s 1.5% convertibles due 2018 were last seen at 193, and the Tesla 0.25% convertibles due 2019 were last seen at 92.5.

Tesla shares had been up 9% intraday and closed up $13.12, or 6%, to $231.55.

The stock was near a five-month high. Deutsche Bank said in its note that the company may be able to derive as much as $5 per share extra for 2020 from its new battery product that will be unveiled on Thursday.

Tesla said last week that it is announcing a home battery and utility-scale battery to help store solar power.

Omnicare unchanged

Omnicare’s convertibles continued to trade fairly actively after news last week of a possible sale of the company.

The older Omnicare 3.25% convertible bonds due 2035 were quoted at 117.875 bid, 118.875 offered versus a share price of $86.37 at the close.

That was basically unchanged from Friday, a New York-based trader said.

On Thursday the Omnicare 3.25% convertibles due 2035 traded at 117.88 and the Omnicare 3.5% convertibles due 2044 traded at 131.625, which was down 0.125 point on an outright basis.

Echo to price Wednesday

Chicago-based Echo Global is a provider of technology-enabled transportation and supply chain management services. Echo is offering $150 million of five-year convertible senior notes, which were talked to yield 2.75% to 3.25% with an initial conversion premium of 27.55% to 32.5%.

The registered deal is being sold via joint bookrunners Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC, with PNC Capital Markets LLC acting as co-manager.

The deal is expected to price after the market close on Wednesday, and there is a $22.5 million greenshoe.

Concurrently with the notes offering, Echo Global plans to price 5 million shares, or about $150 million, of common stock.

Proceeds are earmarked to fund a portion of the purchase price of a previously announced Command Transportation LLC acquisition. In the event that the command acquisition is not consummated, the company plans to use proceeds to redeem the notes – the company has the right to redeem the notes Nov. 3 if the acquisition is not completed – and for working capital and general corporate purposes.

The notes have dividend and takeover protection and mature May 1, 2020.

Mentioned in this article:

Cemex SAB de CV NYSE: CX

Echo Global Logistics Inc. Nasdaq: ECHO

Omnicare Corp. NYSE: OCR

Scorpio Tankers Inc. Nasdaq: STNG

Tesla Motors Inc. Nasdaq: TSLA

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