Morning Commentary: Convertible bond investors stick with the usual suspects; EZCorp on the rise

By Stephanie N. Rotondo

Seattle, July 11 – A convertible bond trader said it was “more of the same” in early trading on Monday.

“It’s all the same names,” he said, such as Intel Corp., Weatherford International LLC and Tesla Motors Inc. The trader also noted that liquidity remained constrained. He attributed the weak activity to it being summer.

“And we still have a long eight weeks to go,” he remarked.

The trader did say that EZCorp Inc. was a notable name. Last week, the company announced that it was selling off its Grupo Finmart business, a unit that makes consumer loans to employees of the Mexican government.

EZCorp will receive $50 million in cash from the transaction.

When the news was first announced on Wednesday, it resulted in a 16% jump in the equity. Those gains continued through the week and a trader said the stock was “continuing its advances today,” pushing up above $9 a share.

He added that the equity has not traded at these levels in over a year.

On Friday, the company’s 2.125% convertible senior notes due 2019 pushed up to an 88.5 area, the trader said. While there was not yet much action in the bonds in early Monday trading, he opined that they were likely trading around 89.5.

“The bonds had traded back down to the 60s and now they are back around 90,” he said.

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