Convertibles in line to slightly higher on hedge; Tesla, Priceline, Fluidigm in trade

By Rebecca Melvin

New York, April 7 - Convertibles were down on an outright basis on Monday but mostly flat to a bit higher on a hedged basis as equity indices slid about 1% each, extending losses suffered Friday that left the Nasdaq stock market down 2.6% on that day.

"All the high-flying stocks from 2013 are getting smoked; there's massive selling," a New York-based trader said. Convertibles were rather quiet, on the other hand, although generally "better for sale," he said.

A second New York-based trader concurred, saying it was a pretty quiet day, but adding, "I think from a hedged point of view, a lot of things moved in line to up a little bit on some of the bigger stock moves."

Tesla Motors Inc.'s typically liquid convertibles were trading on Monday, with the longer-dated 1.25% convertibles the more active issue of three Tesla bonds, and lower outright, but flat to edging up on a hedged basis. Tesla shares were down 2.2%.

Priceline.com Inc.'s 1% convertibles were also fairly active and nearly 2 points lower outright but flat to a bit better on a hedged basis, following a 4-point move lower outright on Friday. Priceline shares were off 0.7% on Monday.

Fluidigm Corp.'s convertibles were down on an outright basis but flat to 0.25 point better on a dollar-neutral, or hedged, basis, as the underlying shares of the South San Francisco, Calif.-based genomics and DNA research company skidded 8%.

Genco Shipping & Trading Ltd.'s 5% convertibles due 2015 remained active at steady pricing around 99 to as high as 99.5 after shooting up more than 12 points in active trade on Friday. The New York-based drybulk shipping company reached a restructuring agreement with most of its lenders that will pave the way to a Chapter 11 bankruptcy reorganization.

MannKind Corp.'s paper changed hands once, according to Trace data, and were down about 4 points to around 114 on an 8% drop in the underlying shares of the Valencia, Calif.-based biopharmaceutical company after word that the Food and Drug Administration had extended its review of the company's inhalable Afrezza diabetes drug to July 15.

"They could have pushed it out a year, so it is somewhat positive," a New York-based trader said.

In the primary market, Toronto's North American Palladium Ltd. downsized its planned convertible debentures with accompanying warrants to up to C$35 million of 7.5% five-year convertibles in a cross-border issue. The warrants were downsized to 25% of the amount of shares that the debentures will convert into, down from 33.33% previously.

Equities sold off again as investors seem to be rotating out of last year's high fliers in the technology and biotechnology sectors and into safer bets ahead of corporate earnings season that is about to get underway.

The S&P 500 stock index ended down 20.05 points, or 1%, to 1,845.04, extending at 1.3% loss on Friday. The Dow Jones industrial average fell 166.84 points, or 1%, to 16,245.87, extending a 159.84-point drop on Friday, while the Nasdaq stock market dropped another 47.97 points, or 1.2%, to 4,079.75 on top of a 2.6% drop on Friday.

Tesla, Priceline active

Tesla's 1.25% convertibles due 2021 were seen last at 90.5 bid, 91 offered versus the Palo Alto, Calif.-based electric car maker's closing share price of $207.52, which was down $4.71, or 2.2%.

Tesla was one of the most active names and was lower in line with the underlying shares, which means it was flat on a hedged basis to up 0.125%, a New York-based trader said.

The Tesla 1.25% convertibles trade on a delta of about 65%.

Priceline's 1% convertibles were seen last around 139.5 bid, 140 offered, which was a little lower in line with the underlying shares of the Norwalk, Conn.-based online travel company.

The bonds were seen 140.85 last on Friday against a 5% stock drop. On Monday they were down less than a point against a share price that was lower by 0.7%.

On a hedged basis, the Priceline bonds were seen up about 0.25 point, a New York-based trader said.

"It's been more of a sell-off in the stock market; credit is pretty stable. It's not really affecting the bond side of things, so it's been good for convert guys on hedge. The outright situation has been different," the trader said.

Technology and areas like solar have had more focus and have had big run ups. Now it seems like they are coming down a lot faster than they went up, he said.

Fluidigm in line

Fluidigm's 2.75% convertible bonds were seen Monday at 103.5 bid, 104.25 offered with the underlying shares at $35.85.

That level was seen dropping in line with the underlying shares, or trading fat, to just slightly better, a New York-based trader said. Fluidigm shares fell $3.12, or 8.2%, to $35.07 on Monday.

There was no particular news behind the stock drop other than that the shares had surged in the 2013 fourth quarter and the beginning of 2014.

"The issue is still up between 8 or 9 points from the day of issue," a New York-based trader said.

The Fluidigm convertibles priced at the end of January.

Mentioned in this article:

Fluidigm Corp. Nasdaq: FLDM

Genco Shippping & Trading Ltd. NYSE: GNK

MannKind Corp. Nasdaq: MNKD

North American Palladium Ltd. NYSE: PAL

Priceline.com Inc. Nasdaq: PCLN

Tesla Motors Inc. Nasdaq: TSLA

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