Convertibles weaken further; planned Red Hat mixed in gray market; new Trina adds on hedge

By Rebecca Melvin

New York, Oct. 1 – Convertibles started out the first day of the fourth quarter on Wednesday weaker again as has been the trend for several weeks.

Equities were also weak, with the Russell 2000 small-cap stock index dropping into correction territory, or down 10% from its record high in July.

The CBOE Volatility index, or VIX, was up, but curbed its session gain into the close.

Names like Yahoo! Inc., Citrix Systems Inc. and Salesforce.com Inc. were lower by 0.25 point to 0.75 point, A New York-based trader said.

“A lot of stuff was weak,” he said.

In the primary market, Red Hat Inc.’s deal for $700 million of five-year convertibles was mixed in the gray market ahead of final terms seen being fixed after the close.

They traded around issue price.

Trina Solar Ltd.’s new 4% convertibles due 2019 traded early Wednesday at 100.375 against weaker shares, but it was also seen at 100 bid after the solar power company priced $100 million of the senior notes at the cheap end of talk.

The new Trina deal closed around 100.5 bid, 101 offered, a syndicate source said, versus shares that were off 5%. He said the new convertibles expanded about a point on a hedged basis.

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