Convertibles firm; Herbalife slips back to unchanged mark; Weatherford a little lower

By Rebecca Melvin

New York, July 18 – The convertible bond market was trading quietly on Monday, but pricing was firm, as the summer slowdown in market activity remained in effect, a New York-based trader said.

There were no U.S. deal launches on Monday or last week, so the primary market has also been quiet after a busy June.

“In general paper keeps getting better for a variety of reasons. We’ve hit another dead spot in financings. With Brexit, people don’t feel a [rate] hike is coming any time soon. Overall, there’s very little incentive to sell. So accounts might make a print here and there, but the market is extremely thin at this point,” the trader said.

Herbalife Ltd.’s 2% convertibles due 2019 traded actively in follow through action from Friday when the bond and stock were up in active trade after word that the nutritional supplements company had reached a settlement with federal regulators over its business operations.

The Herbalife bonds were well off of Friday’s highs when the shares spiked on the news. The stock pared gains by the close, ending up $5.89, or 10%, at $65.25.

On Monday, the Herbalife bonds traded at 104.2, according to Trace data, which was off from levels of as high as 108 on Friday, but off only 0.5 point from Friday’s close. Herbalife shares closed down 47 cents, or 0.7%, at $64.78.

Herbalife was being investigated by the Federal Trade Commission over allegations that it was a pyramid scheme.

A New York-based trader mentioned Herbalife as one of the day’s most actively traded bonds but noted that it was “really quiet.”

Weatherford International Ltd.’s convertible was also noted for activity on a generally slow day. The Weatherford exchangeable was down about a point at 116.4, according to Trace data, as shares of the international oilfield services company slipped a penny or two to about $6.00.

The $1.1 billion of 5.875% exchangeables due 2021 debuted at the beginning of June and have been a staple of traders as the price for the exchangeables surged to as high as 120 to 122 and slipped back mostly in line with pricing in the crude oil market.

Crude oil for August delivery lost 71 cents, or 1.5%, on Monday to $45.24 per barrel.

Elsewhere, Qihoo 360 Technology Co. Ltd.’s 1.75% convertibles traded fairly actively but little changed at around 99.75. Holders of those bonds along with holders of its two sister convertibles series are expected to put the bonds under the fundamental change clause of the notes’ terms because the company is going private and its American Depositary Shares have been delisted from the New York Stock Exchange.

Beijing-based Qihoo provides PC and mobile internet security products in China, and its stock is expected to be relisted there.

Earnings season is ramping up, and Pandora Media Inc.’s 1.75% convertibles due 2020 traded down 0.8 point to 102.96, according to Trace data, as shares of the Oakland, Calif.-based internet radio service slipped 17 cents, or 1.3%, to $12.81 ahead of the social media company’s quarterly earnings report slated to be released on Thursday.

In the broader markets, U.S. stocks edged up, erasing initial weakness, to extend a rally that leaves major indices at record highs.

The Dow Jones industrial average rose 16.50 points, or 0.1%, to 18,533.05 after closing at a record high on Friday. The S&P 500 stock index closed up 5.79 points, or 0.3%, to 2,167.53, and the Nasdaq Composite index gained 30.63 points, or 0.6%, to 5,060.22.

Mentioned in this article:

Herbalife Ltd. NYSE: HLF

Pandora Media Inc. NYSE: P

Weatherford International Ltd. NYSE: WFT

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