Intel call news shakes the market, Scorpio Tankers, Ares Capital see heavy trading volume

By Abigail W. Adams

Portland, Me., Nov. 17 – Intel Corp.’s Thursday night announcement that it will call its 2.95% convertible notes due 2035 has shaken a market where the bond has been a mainstay of trading.

The company’s 2.95% and 3.25% convertible notes composed almost 45% of total trades during Friday’s session.

Scorpio Tankers Inc.’s 2.375% convertible notes due 2019 and Ares Capital Corp.’s 4.75% convertible notes due 2018 and 3.75% convertible notes due 2022 also saw heavy volume but with little movement in their trading prices.

Square Inc.’s 0.375% convertible notes due 2022 continues to grow with leaps and bounds as the company announced it would begin to experiment with Bitcoin.

Intel’s call

The market was in a frenzy after Intel announced it would redeem the full $1.6 billion of its 2.95% convertible notes due 2035 on Dec. 18.

The company’s 2.95% convertible was responsible for $190 million of the $269 million in trades on Friday morning. The heavy volume trading continued and reached $204.7 million by late afternoon, a market source said.

Intel’s 3.25% convertibles note due 2039 were also moving and composed about $62.7 million of the $606 million convertibles traded on Friday.

“Having this Intel bond called really takes something away from the convertibles market,” a market source said.

Intel is a household name and the liquidity of its stock has carried over to the liquidity of its bonds, making it easy to set up a market-neutral hedge, a source said.

The note was trading 2.25 points below parity in the morning session, a market source said, with trades in the 167.625 range versus a stock price of $45.02, a decrease of about 1.47%.

The note continued to drop throughout the day reaching 166.69 versus a stock price of $44.88 late afternoon, according to market sources.

Intel’s 3.25% convertible notes due 2039 also dropped about 5 points on an outright basis, ending the day at 214.68, according to Trace data.

Intel stock closed at $44.59, a decrease of 0.09%.

While the redemption will take $1.6 billion out of a shrinking convertible market, sources were not surprised by the company’s decision.

“That’s a high coupon nowadays,” a market source said. The yield was standard when the deal was priced in 2005.

Scorpio, Ares in play

Scorpio Tankers’ 2.37% convertible notes due 2019 saw heavy trading activity with nearly $18 million of the notes in play in Friday’s session. The company’s stock has also seen heavy trading volumes in recent days with analysts keeping a close eye on the company.

The convertible moved only ¼ point down to 88 versus a stock price of $3.39. Scorpio Tankers’ stock closed the day at $3.4, an increase of 0.06%.

While the company reported third-quarter losses on Nov. 16, its recent merger with Navig8 Product Team has primed the company to take advantage of future demand growth and a dwindling supply line of product tankers, chief executive officer Emanuele Lauro said in the Nov. 16 conference call.

Ares Capital also saw heavy volume trading with $21.25 million of its 3.75% convertible notes due 2022 and $20 million of its 4.75% convertible notes due 2018 in play during Friday’s session, according to market sources.

There was little movement in the note during trades with the 3.75% convertible remaining 2 points above par and the 4.75% note continuing to hover above par, according to Trace data. Ares stock ended the day at $16.37, a decrease of 0.18%.

Square jumps then falls

Square’s 0.375% convertible notes due 2022 continued their upward momentum, climbing 14 points to 202 at mid-afternoon, a market source said. The notes fell 6 points in the final trade of the day to 196.157, according to Trace data.

However, the level is a new record in a week of record-setting trades for the company’s convertible note.

The company’s stock also continued to gain, ending the day at $44.18, an increase of 5.44%. Square recently announced that it would begin to experiment with the on-line crypto-currency Bitcoin.

Mentioned in this article:

Intel Corp. Nasdaq: INTC

Scorpio Tankers Inc. NYSE: STNG

Ares Capital Corp. Nasdaq: ARCC

Square Inc. NYSE: SQ

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