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Morning Commentary: Convertibles trading light as equities decline; Microchip exchanges
By Abigail W. Adams
Portland, Me., March 23 – Trading volume remained light in the convertibles secondary space on Monday as equities extended their losses and credit spreads continued to widen despite the latest round of stimulus from the Federal Reserve.
The Dow Jones industrial average was down 2.62%, the S&P 500 index was down 2.49% and the Nasdaq composite was down 1.24% shortly before 11 a.m. ET.
There was $57 million in reported convertibles trading volume a little over one hour into Monday’s session with few names seeing concentrated trading activity, according to a market source.
Large, liquid issues and higher-quality credits remained in focus.
Fortive Corp.’s 0.875% senior notes due 2022 saw a fresh round of trading activity early in Monday’s session.
The notes were changing hands at 90.5 with $4 million in reported volume, according to a market source.
Fortive stock was changing hands at $42.26, a decrease of 7.28%, shortly before 11 a.m. ET.
The investment-grade notes have been major volume movers throughout the past few weeks as the coronavirus pandemic shuttered the U.S. economy and crashed equities.
Meanwhile, Microchip Technology Inc. announced last Friday that it was exchanging $615 million of the principal amount of its 1.625% convertible notes due 2025 for cash and shares in privately negotiated transactions.
Microchip will pay $615 million in cash and issue 3.1 million shares of common stock at a price of $60.56 in the exchange, according to a company news release.
Following the exchange, the 1.625% notes due 2025 will have $1.11 billion outstanding.
While neither tranche of convertible note was active early Monday, Microchip stock was up almost 9% early in the session.
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