Ctrip.com jumps after earnings; Citrix, Microchip improve; energy at ‘indecision point’

By Rebecca Melvin

New York, March 20 – Ctrip.com International Ltd.’s convertibles jumped in active trade on Friday after the Shanghai-based internet travel site reported strong revenue for its fourth quarter and said it expects revenue to continue to rise in the first quarter.

The Ctrip bonds expanded about 2 points on a dollar-neutral, or hedged, basis even as the company’s shares surged more than 20%, a New York-based trader said.

Elsewhere, the technology sector was attracting interest and many names improved, especially the investment-grade or quasi-IG technology names, a New York-based trader said.

Red Hat Inc., Citrix Systems Inc., Twitter Inc. and Microchip Technology Inc. were mentioned as among those that improved on swap.

“We get the sense that the U.S. suddenly looks a lot cheaper to people than other markets like Europe after Telecom Italia SpA,” a New York trader said.

Telecom Italia priced a €2 billion sale of 1.125% seven-year convertibles at a 70% initial conversion premium on Friday.

“Italia was a €2 billion deal, and in converts that’s pretty relevant in the grand scheme of things,” he said.

Convertibles in the energy and health care sectors were notably quiet on Friday, a trader said.

“We’re at an indecision point in energy, whether crude breaks lower to $35 or bounces back to $50,” the trader said.

The broader markets were higher including oil prices Friday.

West Texas Intermediate crude oil for April delivery ended up $0.82, or 1.8%, to $46.35.

“Things are better to buy, I’d say. The S&P is up 20 points; that helps. Bonds are rallying, oil is rallying,” the trader said.

In fact, the S&P 500 stock index finished up 18.83 points, or 0.9%, to end at 2,108.10, the Dow Jones industrial average gained 168.62, or 0.9%, to close the week at 18,127.65, and the Nasdaq Composite stock index added 34 points, or 0.7%, wrapping the session at 5,026.42.

The close on the Nasdaq represented a 15-year high, and the index ended up 3% for the week. The Dow and S&P were up by better than 2% for the week.

Ctrip.com expands on swap

Ctrip’s 1.25% convertibles due 2018 were seen wrapped around 103.5 versus an underlying share price of $56.00 in the early going, according to a New York-based trader at late morning.

That was about 7 points higher on an outright basis and up 2 points on a swap basis, he said.

By the close the bonds were up to 104 and Ctrip shares closed up $11.44, or 25%, at $57.58.

It was “pretty much the only thing trading today,” a trader said.

Ctrip is one of the stronger names in the Chinese internet space around which there has been a lot of skepticism, the trader said. At this point, it is enjoying some improved credit assumptions.

“We’ve seen good two-way interest by both swap and outrights,” a trader said.

Citrix, Microchip improve

Citrix Systems’ 0.5% convertibles due 2019 traded at 105.25 versus an underlying share price of $63.75. That represented a 0.5 point expansion on a swap basis. Shares of the Fort Lauderdale, Fla.-based cloud computing company added 81 cents, or 1.3%, to $63.79 on Friday.

“It seems like the quasi-investment-grade names have gone better today,” a trader said.

Red Hat convertibles were up 0.5 point and Microchip was up 0.25 point, the trader said.

Twitter improved on Thursday, he said.

Volume-wise there wasn’t a ton more action in these names, he said, but price-wise they improved.

Twitter’s 0.25% convertibles due 2019, or the A tranche, changed hands at 85.5, which was up 0.22 point, according to Trace data. And the Twitter 1% convertibles due 2021, or the B tranche, which was more actively traded was exchanged at 96.9, which was up a point.

Twitter shares were up 51 cents, or 1%, to $48.44.

Telecom Italia sells €2 billion

The seven-year unsecured equity-linked bonds of Telecom Italia have a par of €100,000 and were priced to yield 1.125% with an initial conversion premium of 70% over the volume-weighted average price of shares on the Milan exchange between launch and pricing.

The Italian telecommunications company plans to use proceeds to pre-fund its recently announced capital expenditure plan.

The Regulation S deal, which included a €500 million increase option, came toward the cheap end of 0.875% to 1.375% coupon talk and at the talked premium point.

BNP Paribas and J.P. Morgan were bookrunners and joint global coordinators of the deal, and Barclays, Citigroup Global Markets Inc., Credit Suisse and Unicredit were also bookrunners.

Mentioned in this article:

Citrix Systems Inc. Nasdaq: CTXS

Ctrip.com International Ltd. Nasdaq: CTRP

Microchip Technologies Inc. Nasdaq: MCHP

Red Hat Inc. NYSE: RHT

Telecom Italia SpA NYSE: TI

Twitter Inc. Nasdaq: TWTR

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