Convertibles quiet; Workday up with shares before earnings; Spectranetics, New Mountain to price

By Rebecca Melvin

New York, May 27 - A lack of catalysts contributed to thin post-holiday trading in convertibles on Tuesday - the week's first session following the Memorial Day weekend - as equities ticked higher and U.S. Treasury yields and the CBOE Volatility Index hovered around recently notched low levels. The S&P 500 stock index plodded further into record territory, however.

Workday Inc.'s convertibles traded in line with the underlying shares of the Pleasanton, Calif.-based human resources and financial cloud computing company ahead of the company's fiscal first-quarter earnings that were released after the market close, revealing a smaller-than-expected net loss and better-than-expected revenue. Shares moved up another 6% in after-hours trade.

Vipshop Holdings Ltd.'s 1.5% convertibles due 2019 also moved in line with their underlying shares at between 109.5 and 112, according to Trace data. That was lower than Friday's 111.5 close for the Vipshop bond, but still representing a strong recovery from levels that were well below par in early April when shares of the Guangzhou, China-based online discount retailer plunged.

Elsewhere, DryShips Inc.'s 5% convertibles, which have six months left to go before their Dec. 1 maturity date, traded flat to higher on Tuesday after the Athens-based dry bulk and off-shore contract drilling oil services company reported earnings on Friday.

Other than that there was nothing to report, convertibles traders said.

"It was really quiet," a New York-based convertibles sellsider said when asked if the convertibles market contracted at all on swap.

"There was nothing crazy," a second New York-based trader said.

After the market close, two new deals were launched in the primary market.

Spectranetics Corp. launched an offering of $200 million of 20-year convertible senior notes and New Mountain Finance Corp. said it plans to price $100 million of five-year convertible senior notes. Both deals went on the calendar for pricing after the market close on Wednesday.

Equities moved up again, led by the technology-heavy Nasdaq stock market, which ended up 51.26 points, or 1.2%, to 4,237.07 and with the S&P 500 stock index notching another all-time high at 1,911.91, which was up 11.38 points, or 0.6%.

In economic news, the Commerce Department reported orders for U.S. durable goods rose in April by 0.8%, which was better than many economists expected. The data was lifted by an uptick in orders for defense equipment.

In addition, consumer confidence rose in May to 83 from 81.7 in April, according to the Conference Board index of consumer attitudes.

Later in the week traders will be watching a revision of gross domestic product for the first quarter.

Workday trades in line

Workday's 0.75% convertibles due 2018 were heard at 121.875 bid, 122.375 offered versus an underlying share price of $81.00.

The Workday 1.5% convertibles due 2020 were seen at 124.75 bid, 125.50 offered versus the same $81.00 share price.

Workday shares ended up $3.83, or 4.9%, at $82.13. The stock extended its gains in after-hours action.

The bonds were in line with the underlying shares, a New York-based trader said.

After the market close, the cloud computing software company reported a smaller-than-expected fiscal first quarter loss of 13 cents per share on revenue that beat estimates, rising 74% to $159.7 million.

Analysts had been expecting a 15 cents per share loss and revenue of $152 million.

In addition, the company said the outlook for the current quarter is for revenue of $173 million to $178 million, which is higher than expectations for $172 million in revenue.

Shares rose another 6% in after-hours trading.

Spectranetics to price

Spectranetics, a Colorado Springs, Colo.-based maker of single-use medical devices for use in the cardiovascular system, plans to sell $200 million of 20-year convertibles after the market close on Wednesday. The securities were talked to yield 2.75% to 3.25% with an initial conversion premium of 32.5% to 37.5%, according to a preliminary term sheet.

Piper Jaffray & Co. is bookrunner of the registered offering, which has a $30 million greenshoe.

Proceeds are intended to fund a proposed acquisition, but if that transaction is not completed the funds will be used for research and development, commercialization of products, working capital and other general corporate purposes.

The notes are non-callable for four years, and then provisionally callable for three years if Spectranetics shares exceed 130% of the conversion price for 30 consecutive days.

There are investor puts in years seven, 10 and 15.

There is takeover protection and conversion ratio adjustments for dividends paid on the common stock. The bonds will be physically settled.

New Mountain to price

New Mountain, a New York-based investment company, plans to price $100 million of five-year convertible senior notes that were talked to yield 4.5% to 5% with an initial conversion premium of 10% to 15%.

Goldman Sachs & Co. is bookrunner of the Rule 144A offering that has a $15 million greenshoe.

Proceeds will be used to repay outstanding debt under its credit facilities and other general corporate purposes, including working capital purposes.

Mentioned in this article:

DryShips Inc. Nasdaq: DRYS

New Mountain Finance Corp. Nasdaq: NMFC

The Spectranetics Corp. Nasdaq: SPNC

Workday Inc. Nasdaq: WDAY

Vipshop Holdings Ltd. Nasdaq: VIPS

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