Spectranetics flat to better on swap after warning; Iconix comes in; Cobalt in upper 60s

By Rebecca Melvin

New York, July 24 – Spectranetics Corp.’s convertibles slumped on an outright basis but were flat to better on a dollar-neutral, or swap, basis on Friday after the common shares of the Colorado Springs, Colo.-based medical device maker tanked on lowered full-year revenue guidance.

The Spectranetics convertibles were at 89.5 bid, 90.5 offered versus an underlying common share price of $17.00, a New York-based trader said Friday afternoon.

That was flat, or in line, on a dollar-neutral basis if holders were on a delta hedge of 60%, the trader said. The stock fell 34%.

Iconix Brand Group Inc.’s 2.5% convertibles due 2016 were also lower on a swap basis with the common shares of the New York-based brand management company down 3%.

“The Iconix bonds were in 0.375 point but that took out a big seller,” a trader said.

U.S. convertibles put in a mostly quiet session on Friday, but were down for the week, market sources said.

Equities were thought to have stabilized in the early going Friday, but they extended losses intraday, with the major indexes ending down about 1% each.

The poor tone in the broader markets and lack of a forward calendar for new convertibles deals meant that there was little pressure on market players to make decisions, a New York-based trader said.

Even energy names, which had been weakening this past week, were stable with little by way of trades to report, the trader said.

Cobalt International Energy Inc.’s convertibles traded a bit with the Cobalt 2.625% convertibles trading down into the 60s this week and last seen on Friday at 67.5. Cobalt’s common stock was down a nickel at $7.95.

There was also a little bit of Chesapeake Energy Corp. trading. But regarding pricing, the trader said, “nothing is moving. It’s more or less a nip here, a tuck there.”

The new Pattern Energy Group Inc. convertibles, which debuted in the market on Thursday, were not heard in trade after they slipped below issue price and stabilized there late Thursday.

Also in earnings news, Trinity Industries Inc.’s common shares popped after the Dallas-based maker of rail cars beat second-quarter earnings estimates and guided full-year earnings above consensus, but missed on revenue.

The Trinity 3.875% convertibles due 2036 were not seen to have traded on Friday but changed hands on Thursday at 124, according to Trace data.

Trinity’s common shares pared early gains to close up $1.36, or 5%, at $27.33. Earlier they had been up 11%.

The S&P 500 stock index ended down 22.4 points, or 1%, to 2,079.65, the Dow Jones industrial average fell 1623.39 points, or 0.9%, to 17,568.53 and the Nasdaq Composite index lost 57.78 points, or 1%, to 5,088.63.

Looking ahead to next week, earnings reports will remain in focus as will economic data and the Federal Reserve’s two-day Open Market Committee meeting, which is set to begin on Tuesday.

Following earnings season, convertibles players expect that a decent forward calendar for new issuance will resume.

Spectranetics slumps outright

Spectranetics’ 2.625% convertibles due 2034 fell about 18 points on an outright basis to about 90 as the common stock of the maker of single-use medical devices fell $8.53, or 34%, to $16.30.

The bonds fell from 108 previously.

In trading action on Friday, “the bonds were all over the place,” a New York-based trader said.

On a lighter 60% delta the bonds were about flat, or in line, on a dollar-neutral basis.

“They nuked straight down, most people were lighter than the model,” the trader said.

On a delta of about 75%, the bonds were seen to have expanded about 3 points, while on a 70% delta, the bonds expanded 1.5 points.

“The model was a 78% but it seems that most people were lighter than that,” the trader said.

Spectranetics reported a loss of $7.2 million, or 17 cents per share, for its second quarter, compared to a loss of $5.3 million, or 13 cents per share, for the year-earlier period.

Excluding one-time items and including acquisition-related items, the loss was 22 cents per share, which was better than estimates for a loss of 24 cents per share.

Spectranetics posted second-quarter revenue of $61.68 million, compared to $43.56 million in revenue for the year-earlier period.

Looking ahead, the company lowered its full year guidance to $240 million to $250 million from previous guidance of $258 million. Analysts expected the company to report revenue of $258.04 million.

The company expects to report a loss of 96 cents to $1.07 a share for the full year compared to analysts’ estimates for a loss of $1.05 a share.

The company said that the outlook was adjusted based on first-half results that fell short of plan and tempered expectations for the second half. Performance of its AngioSculpt franchise was below expectations due to the relatively rapid adoption of competitive drug-coated balloons and our ongoing sales force optimization efforts.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Cobalt International Energy Inc. NYSE: CIE

Iconix Brand Group Inc. Nasdaq: ICON

Pattern Energy Group Inc. Nasdaq: PEGI

Spectranetics Corp. Nasdaq: SPNC

Trinity Industries Inc. NYSE: TRN

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