Convertibles see positive tone; DISH bonds expand on swap; Citrix bonds add; Peabody gains

By Rebecca Melvin

New York, Oct. 20 – U.S. convertibles traded mostly better on Thursday despite lackluster equities, as the same positive tone that has been characteristic of the market for much of October remained in place, a New York-based sellsider said.

“It’s slow, but steady,” the trader said, referring to a slow grind higher in pricing of many convertibles.

DISH Network Corp.’s 3.375% convertible notes due 2026 traded up on both an outright basis and a dollar-neutral, or swap, basis amid speculation that it is an acquisition target of Verizon Communications Inc., the sellsider said.

Citrix Systems Inc.’s 0.5% convertibles due 2019 were also in trade and up slightly on swap after the Fort Lauderdale, Fla.-based cloud computing company reported better-than-expected earnings and raised its full-year outlook.

Peabody Energy Corp.’s 4.75% convertibles due 2041 were an important name of the day again, at least in distressed circles, as it moved up in active trade. The bonds have been pulling higher this week as coal prices go up.

Fluidigm Corp.’s 2.75% convertibles due 2034 were indicated higher to about 59 from 53 as the underlying common stock climbed 58 cents, or 11.6%, to $5.57 after the South San Francisco, Calif.-based maker of biological research equipment named a new chief executive officer.

S. Christopher Linthwaite, who was previously Fluidigm’s president and chief operating officer, has been named CEO, effective immediately, succeeding Gajus V. Worthington, who stepped down as CEO and board member after 18 years.

Orexigen Therapeutics Inc.’s 2.75% convertibles due 2020 traded down multiple points to the low 20s even as the shares of the La Jolla, Calif.-based biotechnology company added 7 cents, or 2.6%, to $2.78.

The Orexigen convertibles slid 6.125 points to 21, according to Trace data.

There was the ongoing positive trend in the overall convertibles market even as common stocks slipped. The Dow Jones industrial average closed down 40.27 points, or 0.2%, to 18,162.35, the S&P 500 stock index lost 2.95 points, or 0.14%, to 2,141.34, and the Nasdaq stock market was off 4.58 points, or 0.09%, to 5,241.83.

DISH bonds improve

DISH Network’s 3.375% convertible notes due 2026 traded up on Thursday and were seen at 115.39 late in the day, or higher by nearly 3 points on an absolute basis.

In early trading, the DISH notes were around 113.375 bid, 113.875 offered versus an underlying common stock price of $58.30. On an absolute basis at that time, the bond was up about 1.5 points.

Pushing both the stock and bonds higher was speculation that it is an acquisition target of Verizon Communications, a market source said.

On a swap basis, the bonds expanded about 0.5 point, a sellsider said in the early going.

The DISH issue is $3 billion in size and priced in August, so it is a benchmark type issue for the market.

“It’s a big issue, and these came not too long ago at par, so 14% in a couple of months is not too bad,” a sellsider said.

Citrix edges up

Citrix’s 0.5% convertibles due 2019 traded up to about 114.25, which was higher by 0.75 point on an outright basis and up 0.125 point to 0.25 point on a swap basis, a market source said.

Citrix shares spiked up a few percentage points briefly early Thursday but were relatively unchanged at the session’s close, or up 4 cents, or 0.05%, to $86.34.

Late Wednesday, the software company reported third-quarter profit of $131.9 million, or 84 cents per share, up from $55.9 million, or 35 cents a share, a year earlier. Excluding items, profit rose to $1.32 per share from $1.04 a year earlier, topping analysts’ estimates of $1.19 per share.

Revenue rose 3.4% to $841.3 million, which was better than the $827.2 million estimate.

Better income from its license updates and maintenance business were behind the strength.

Looking ahead, the company expects adjusted earnings for the year of between $5.18 per share and $5.20 per share on revenue in the range of $3.4 billion to $3.41 billion. Previously, the company expected adjusted earnings for the year of between $5.00 and $5.10 per share on $3.3 billion to $3.39 billion of revenue.

The company also expects 2017 revenue to rise between 3% and 4%, according to its preliminary outlook.

Peabody extends gains

Peabody’s 4.75% convertibles were up to nearly 14 on Thursday, which was up 1.8 points on the day.

“It goes up every day,” a Connecticut-based sellside trader said of the bond.

“They moved up again” on the back of improving coal prices, he said.

On Monday, the Peabody notes traded between 8 and 9, which was a jump of 5 points on the day.

In the past couple of days, coal prices have spiked to multi-year highs around the world. The recent, extended bear market in coal means that there is a lag currently between getting more production up online amid an uptick in demand.

Mentioned in this article.

DISH Network Corp. Nasdaq: DISH

Citrix Systems Inc. Nasdaq: CTXS

Fluidigm Corp. Nasdaq: FLDM

Orexigen Therapeutics Inc. Nasdaq: OREX

Peabody Energy Corp. NYSE: BTU

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