Newer convertibles, balanced names soften; AMD down; Pandora unchanged to better on swap

By Rebecca Melvin

New York, Sept. 13 – The U.S. convertibles market softened on Tuesday, with several of the newer issues that priced last week and in August trading lower. Selling was seen in certain balanced convertibles as market volatility increased and equities declined.

Advanced Micro Devices Inc.’s 2.125% convertibles were lower on an outright basis, and contracted about 0.25 point on a dollar-neutral, or hedged, basis as they remained in trade for a third straight day after the $700 million issue debuted in the market on Friday, a New York-based trader said.

The AMD bonds slipped 1.5 points to 2 points to a 98 handle as the price of the common stock of the Sunnyvale, Calif.-based chip maker that underlies the bond fell more than 3%.

DISH Network Corp.’s $3 billion convertibles deal that priced in August also traded down about 0.25 point, while Ctrip.com International Ltd.’s $900 million of 1.25% convertibles due 2022 that priced last week dropped about 0.5 point on swap, the trader said.

“Today a few recent issues were softer and select outright, balanced names were better for sale,” the trader said.

Better for sale means that there are more sellers than buyers, and pricing is therefore weak.

There was weakness in the broader markets generally and weakness in converts, perhaps related to the stronger pace of new issuance.

But Pandora Media Inc.’s convertibles were seen in line or a touch stronger on a swap basis as shares of the Oakland, Calif.-based internet radio service moved lower by about 1.3% to close at $14.10 each.

Pandora was in the news having signed direct licensing agreements with major record labels, including Sony Corp., Vivendi SA Universal Music Group and Merlin Network. The agreements may move the internet radio company closer to offering an on-demand music streaming service. Pandora shares were initially higher at the market open but dropped in early trading.

With Pandora shares around 14.17 near the end of the session, the Pandora 1.75% convertibles due 2020 were quoted at 109.5 bid, 110 offered, a New York-based trader said.

But the bonds were not actively traded. With the hopes of some strength in the shares early there was an expectation that more outrights would be looking to sell, but there was not much movement. Nevertheless, the bonds were unchanged to a tad better from the early mark by about 0.125 point, a trader said, adding that that would be considered “outperformance” given how the rest of the market performed.

On an outright basis, the bonds were down about 30 cents to 33 cents even as the stock failed to hold in.

In the primary market, Oasis Petroleum Inc. launched an overnight offering of $250 million of seven-year convertible senior notes.

The Houston-based energy company’s registered deal was talked at a fixed 2.625% coupon and an initial conversion premium of 35% to 37.5%.

And Wheeler Real Estate Investment Trust Inc. launched an offering of series D cumulative convertible preferred shares with a liquidation preference of $25.00 per share, according to a regulatory filing.

Equities fell. The S&P 500 stock index lost 32 points, or 1.5%, to 2,127.02; the Nasdaq composite index was down 56.63 points, or 1.1%, to 5,155.25 and the Dow Jones industrial average fell 258 points, or 1.4%, to 18.066.75.

The move lower erases the gains on stocks’ snapback on Monday and adds to Friday’s 2% to 2.5% losses in the major indices.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Ctrip.com International Ltd. Nasdaq: CTRP

DISH Network Corp. Nasdaq: DISH

Oasis Petroleum Inc. NYSE: OAS

Pandora Media Inc. Nasdaq: P

Wheeler Real Estate Investment Trust Inc. Nasdaq: WHLR

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