Convertibles lower with month-end in focus; Impax slips below par; June primary falters

By Rebecca Melvin

New York, June 30 – Market players were trimming their holdings of U.S. convertibles Tuesday on the last day of the month and of the quarter. The moves followed broad-based weakness on Monday when the universe was characterized to have come in about 0.5 point on swap.

“Things are OK; we didn’t bring anything ‘in’ drastically further,” a New York-based sellsider said regarding Tuesday’s action.

Names in trade were random and name specific, the sellsider said. The tone was one of essentially “limping to the end to put June away.” There was not a lot of trading.

Impax Laboratories Inc.’s 2% convertibles, which priced last week, slipped below par while Impax shares fluctuated and ended just fractionally higher at $45.92.

“That’s not so good,” a trader said regarding the newer Impax Labs’ convertibles trading down below par.

Ironwood Pharmaceuticals Inc.’s 2.25% convertibles, which priced in the beginning of June, were also trading below par.

Back in more established issues, Isis Pharmaceuticals Inc.’s convertibles were lower with shares of the Carlsbad, Calif.-based gene-based drug developer up more than 1% in the early going. Shares ended up nearly 3%.

Isis’ 1% convertibles due 2021 traded at 107.6, which was down 3.5 points, according to Trace data, with shares around $56.00.

But a trader said that that issue had improved of late and didn’t look to have done too badly on Tuesday.

Acorda Therapeutics Inc.’s 1.75% convertibles due 2021 were around 101. Those convertibles had traded at 104 around midweek last week. Shares of the Ardsley, N.Y.-based biopharmaceutical company, which develops therapies for neurological disorders, were up 19 cents, or 0.6%, at $33.62 last.

There were no new issues launched or priced in U.S. convertibles, but Sony Corp. launched a deal in the international primary market. The Tokyo-based electronics company plans to price ¥120 billion of seven-year convertible bonds under Regulation S at a 40% initial conversion premium in mid-July.

Sony also plans to price 87.2 million shares of new common stock and a secondary offering of 4.8 million shares of common stock.

Proceeds will be used to drive growth and make future investments.

On Monday equities were sharply lower on worries regarding the worsening Greek debt crisis. Negotiations with Greece’s creditors had broken down and the government called a July 5 national referendum to decide whether to accept or reject conditions for a bailout.

On Tuesday shares began to snap back, but the rally faded during the session so that indices ended up fractionally.

Primary shows weakness

Market players noted how much weaker this year’s June primary month was compared to June 2014.

“Historically, new issuance in May and June is very strong, and I am somewhat surprised that there was less issuance in the last month-and-a-half,” a market source said.

For June 2015, there was $6.23 billion of new issuance in 13 deals, which was below June 2014 when there was more than $9 billion in 26 deals.

“There were half as many deals; that is interesting,” a source said.

The fact that there is little differentiation in straight debt rates and convertible debt rates has meant that issuers have moved away from convertible issuance.

“We have just gone though one of the busiest periods of the year, and it was very quiet, we are trying to rationalize why that’s the case. No one would have wanted to issue with the Greek debt crisis going on,” a source said. But there has also been less prefunding in M&A deals and health care with convertibles and less being used to fund share buybacks, the source said.

Mentioned in this article:

Acorda Therapeutics Inc. Nasdaq: ACOR

Impax Laboratories Inc. Nasdaq: IPXL

Ironwood Pharmaceuticals Inc. Nasdaq: IRWD

Isis Pharmaceuticals Inc. Nasdaq: ISIS

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