Convertibles better on improved sentiment; SanDisk 1.5% gains on swap; SunEdison rises

By Rebecca Melvin

New York, Sept. 3 – U.S. convertibles improved early Thursday amid better buyers even as the countdown to the holiday weekend was in full swing, and slowing trading volume was anticipated.

“It’s a lift-a-thon. Sentiment has turned, and everything across the board is better by 0.25 point to 0.5 point,” a New York-based trader said at late morning.

Later, with a fade in the equities rally, convertibles quieted.

A notably improved issue was SanDisk Corp.’s 1.5% convertibles due 2017.

The bonds of the Milpitas, Calif.-based flash memory chip maker moved up to 126.90 to 127.00 in active trade in the early going, which was up from about 124.50 on Wednesday, according to Trace data. Later those bonds were seen to have backed off with lower shares to 125.25 to 125.50.

SunEdison Inc. s beaten-down convertibles traded up at least on an outright basis as the underlying shares of the renewable power company jumped 11% on comments from chief executive Ahmad Chatila that the company could be cash flow positive as soon as the end of this year. The cash flow will come from renewable energy projects that SunEdison invests in and sells to yield companies.

Earlier estimates on when the company would start making money were late 2016 or early 2017.

Chatila’s comments were made during a Wednesday interview with Bloomberg.

SunEdison’s shares had fallen about 55% last month to $10.00 from around $22.00.

SunEdison’s 6.75% perpetual convertible preferred shares, which priced in August at par and promptly sank, were indicated up on Thursday at 88.6 from 83.9 previously, according to a market source.

SunEdison’s newer 2.625% convertibles due 2023, or the E tranche, were seen up at 64, from 61, and the 3.375% convertibles due 2025, or the F tranche, were seen up at 65 from 61.

SunEdison’s 0.25% convertibles due 2020 were seen up at 72 from 67, and the SunEdison 2.375% convertibles due 2022 were seen trading up at about 75 from 70.

Meanwhile, the shorter-dated SunEdison 2% convertibles due 2018 were seen to have recrossed par from the upper 90s.

SunEdison common shares rose $1.15, or 11%, to $11.94.

Other names such as Intel Corp. and Priceline Group Inc. were better by 0.25 point to 0.5 point at late morning.

UTi Worldwide Inc.’s 4.5% convertibles due 2019 were last around 87 but were not seen to have traded Thursday ahead of quarterly results to be reported by the Virgin Islands-based ocean freight and logistics company after the close.

UTi Worldwide shares were down 28 cents, or 4%, at $6.53 at the close and then slumped in after-hours trade. They were seen down $1.05, or 16%, at $5.48 in after-hours trade.

Why convertibles improved overall on Thursday was unclear.

“There isn’t any real reason [for Thursday’s improvement] other than sentiment,” the trader said, adding that the improvement was concentrated on Thursday’s session and hadn’t improved much on Wednesday despite the fact that equities were trading up on Wednesday as well as on Thursday.

By the end of the session, equities pared gains to end narrowly mixed. The Dow Jones industrial average and S&P 500 stock index ended slightly positive or in the green by 0.1%, and the Nasdaq Composite index ended down 16.48 points, or 0.4%, at 4,733.50.

At its peak, the Nasdaq had been up by 50 points, or 1%, on Thursday.

All eyes are on the U.S. non-farm payrolls August report, which is being released by the Labor Department early Friday, for indications on whether the Federal Reserve will begin to raise rates at its policy meeting Sept. 15 and Sept. 16.

SanDisk outperforms

SanDisk’s 1.5% convertibles due 2017 ended the session around 125.50 after earlier jumping to around 127 on buying interest from outright investors.

The bond is being added to a convertibles benchmark index and there were outright buyers, a trader said.

SanDisk shares were also higher in the early going, changing hands up about 2% at $55.15, but ended up only 0.1%, or 7 cents, at $54.12.

The bonds expanded on a dollar-neutral, or hedged, basis by 0.5 point to 0.75 point, outperforming most of the rest of the convertibles market.

The market was “better to buy” despite what has generally been a slow holiday week, a trader said.

“But sentiment has turned and things are markedly better,” he said.

Mentioned in this article:

Intel Corp. Nasdaq: INTC

Priceline Group Inc. Nasdaq: PCLN

SanDisk Corp. Nasdaq: SNDK

SunEdison Inc. Nasdaq: SUNE

UTI Worldwide Inc. Nasdaq: UTIW

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