Morning Commentary: Yahoo! convertibles active, firm on stock buyback; Spirit Realty eyed

By Stephanie N. Rotondo

Seattle, May 16 – While liquidity in the convertible bond market remained light, Yahoo! Inc. was getting some play, a trader reported early Tuesday.

The trader said the 0% convertible notes due 2018 were trading at 107.

“That’s probably the highest they’ve ever been,” he said, noting that parity was 94.61.

“They are buying back all this stock,” the trader added, referring to reports that Yahoo! had commenced a Dutch auction tender offer for up to $3 billion in stock. “So that’s a big help.”

The shares (Nasdaq: YHOO) were up more than 1% at mid-morning.

The tender offer is being done ahead of the company’s pending sale to Verizon Communications Inc. The stock will be repurchased at a price between $44.74 and $50.79.

The offer will expire June 13.

Meanwhile, Spirit Realty Capital Inc.’s 3.75% convertible notes due 2021 continued to be on the radar.

A trader saw the issue trading “either side of 98” at mid-morning. That equated to a 79% premium over parity, he said, and a 4.3% return.

The common stock, by comparison, has a yield of nearly 10%, the trader pointed out.

“So that’s a great trade...for the guy that sold them,” he said.

The equity (NYSE: SRC) was off over 2% early Tuesday, though there was no fresh news to pull the shares down.

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