Newmont Mining, Royal Gold trade; Workday As down on swap; primary poised to restart

By Rebecca Melvin

New York, Aug. 28 – Newmont Mining Corp. traded flattish on Thursday – or about a point lower compared to recent levels – as U.S. convertibles were generally quiet and equity markets slipped in light participation as the long holiday weekend for Labor Day drew closer.

Newmont’s 1.625% convertibles due 2017 changed hands little changed at 107.25 in early trading, when shares of the Denver-based gold and copper mining company were up by about 1%.

Royal Gold Inc.’s 2.875% convertibles due 2019 also traded and were called “in line to up a touch dollar neutral,” with shares of the Denver-based royalty stream company on the rise. The bonds were quoted at 109 bid, 109.5 offered with the underlying shares at $76.50.

Elsewhere, Workday Inc.’s dual-tranche convertibles traded lower outright and were lower and flat on a dollar-neutral, or hedged, basis, as shares of the Pleasanton, Calif.-based cloud-based enterprise software company slumped following the company’s better-than-expected quarterly results.

Workday also guided higher for full-year revenue, but shares still sagged, apparently amid concerns related to its guidance not to expect profits until fiscal year 2016.

MercadoLibre Inc., which is a typically illiquid name, also traded, with the 2.25% convertibles changing hands at 112.5, 112.625 and 112.75 versus an underlying share price for the Argentina-based Latin American version of eBay of $114.00.

Overall, trading was “very quiet,” market sources said, with sparsely staffed trading desks getting down to skeleton crews by late morning ahead of the long weekend.

“People are leaving to start their weekend,” a trader said.

Equities ended in the red, but not by much, convertibles traders said.

“This is a rounding error. I wouldn’t be surprised if they ended flat or even returned to positive territory,” one trader said at late morning.

Influencing the markets was better-than-expected U.S. gross domestic product data and resurfacing geopolitical tensions in the Ukraine. Ukrainian president Petro Poroshenko said Russian military forces entered Ukraine and seized the coastal town of Novoazovsk.

GDP grew at a seasonally adjusted annual rate of 4.2% in the second quarter, the Commerce Department said Thursday. The agency previously estimated second quarter growth at a rate of 4%. Economists had expected growth for the second quarter to be marked down to a 3.8% pace.

Primary poised to restart

The primary convertibles market, which has been quiet for the last two weeks, was “looking pretty good,” and new deal flow was expected to restart sooner rather than later.

“We’re not going to have to wait,” a New York-based syndicate source said regarding whether there would be issuance next week right after Labor Day or in mid-September.

Convertibles will be buoyed by the broader markets, he said.

“Equity market keeps grinding higher and everything with it,” the syndicate source said, citing a steadily improving labor market as part of a strong backdrop on which financial markets can build.

“People keep asking me when is [the market] going to crack? And the truth is there is no catalyst that anyone can see; there is no catalyst for a big selloff. It will fall at some point, and when it does, it will probably be for technical reasons.”

As for geopolitical tensions that have spurred recent volatility, he said, “There are three different hot spots in the world, and it doesn’t seem to matter. The economic data is solid, and it’s a good backdrop for a continuation of the current trend.”

Newmont, Royal Gold in trade

Newmont’s 1.625% convertibles due 2017 traded around 107.25 with shares up 29 cents, or 1%, at $26.81. They were later quoted at 107.1875 with the stock at $26.95.

“The Newmonts were comfortably 108 last week, but guys seem to be paring down their positions amid a lessening of geopolitical tensions,” a New York-based trader said. “There’s less reason to hold an asset like this.”

Expectations had been growing in the last few days for a non-violent settlement in the Ukraine and a ceasefire agreement in Gaza. Meanwhile the recent success of U.S. military drones in Iraq also fueled positive expectations. But the latest headlines were negative, with reports of Russian troops moving into Ukraine.

Royal Gold traded in line to better amid a 2% rise in the underlying shares.

Workday As down

Workday’s 0.75% convertibles due 2018, or the A notes, were quoted at 126 bid, 126.50 offered versus an underlying share price of $88.15. Later the bond was seen at 125.625.

Workday’s 1.5% convertibles due 2020, or the B notes, were quoted at 130 bid, 130.50 offered versus the same $88.15 share price.

Workday shares fell $4.41, or 4.9%, at $85.89 on Thursday after the company reported its earnings late Wednesday.

“The Workday A bonds were down about 0.375 point, and the Workday B is unchanged delta neutral,” a market source said.

The human resources and financial cloud-computing software company reported a smaller net loss of $19.1 million, or 11 cents per share, compared to a $21.7 million net loss, or 13 cents per share, for the same period last year.

Total revenue of $186.8 million was up 74% from the year-earlier period, and subscription revenues were up 77% to $143.7 million from the same period of last year, the company said in its earnings release.

Operating cash flows were negative $9 million and free cash flows were negative $37.4 million.

The results beat earnings estimates, and it guided fiscal third-quarter results above consensus.

Meanwhile analysts’ responses to the earnings were mixed. Canaccord Genuity analyst Richard Davis raised his annual revenue estimate to $770 million from $745 million but cut his profit estimate to a loss of 54 cents, from a loss of 44 cents.

Looking ahead, Workday anticipates third-quarter revenue of $200 million to $205 million and total revenue for the year of $760 million to $770 million.

In its conference call, the company reiterated its intention to continue to grow the business and leave profits on hold until fiscal 2016.

Mentioned in this article:

MercadoLibre Inc. Nasdaq: MELI

Newmont Mining Corp. NYSE: NEM

Royal Gold Inc. Nasdaq: RGLD

Workday Inc. Nasdaq: WDAY

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