Convertibles trading light as equities decline; Akamai, Fortive active; Microchip eyed

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 unlimited quantitative easing from the Federal Reserve did little to reassure nervous investors with Congress still failing to pass a stimulus bill.

The Dow Jones industrial average closed the day down 3.04%, the S&P 500 index down 2.93% and the Nasdaq composite down 0.27%.

Large, liquid issues and higher-quality credits remained in focus.

Fortive Corp.’s 0.875% senior notes due 2022 were again major volume movers in the secondary space with the notes continuing to trade at a discount.

Euronet Worldwide Inc.’s 0.75% convertible notes due 2049 were also active with the notes now moving on an 88-handle.

Akamai Technologies Inc.’s convertible notes were the most actively traded tech name with the notes among the few that were available to buy, a market source said.

While Microchip Technology Inc.’s stock led the rally in the tech sector, its convertible notes were slow to trade.

However, the company recently announced a privately negotiated exchange for $615 million of the principal amount of its 1.625% convertible notes due 2025.

High grade trades

Fortive’s 0.875% senior notes due 2022 were again major volume movers in the secondary space.

The notes were changing hands at 90.5 early in the session.

They traded down to 87.75 in the late afternoon.

Fortive stock traded to a high of $45.04 and a low of $40.64 before closing the day at $42.01, a decrease of 7.83%.

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.

Euronet Worldwide’s 0.75% convertible notes due 2049 also saw some action with the notes now trading on an 88-handle.

The 0.75% notes were changing hands at 88.5 in the late afternoon.

Euronet stock traded to a low of $72.81 and a high of $80.67 before closing the day at $74.07, a decrease of 5.43%.

At one point in time, the notes were among the richest in the convertibles universe and were heavily shorted, a source previously said.

Akamai active

Akamai’s convertible notes were again active in the secondary space with the notes among the few available to buy, a source said.

The notes were trading down on an outright basis even as the content delivery network, cybersecurity and cloud service provider’s stock posted gains.

The 0.125% convertible notes due 2025 traded down more than 3 points outright to 102.25.

The 0.375% convertible notes due 2027 continued to change hands around 94.25.

Akamai stock traded to a low of $81.80 and a high of $88.21 before closing the day at $85.54, an increase of 3.85%.

With stay-at-home orders and remote work, Akamai’s fundamentals are still considered good, sources said.

Microchip’s exchange

Microchip Technology’s convertible notes were slow to trade on Monday even as stock led the rally in the tech sector.

While volume was light, Microchip’s 1.625% convertible notes due 2025 traded up about 7 points outright.

The notes were seen changing hands at 132 in the late afternoon.

Microchip’s 1.625% convertible notes due 2027 were more active.

The notes traded up about 4 points outright to change hands just shy of par in the late afternoon.

Microchip stock traded to a low of $62.36 and a high of $68.64 before closing the day at $65.51, an increase of 9.84%.

Microchip 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.

To fund the cash portion of the exchange, Microchip entered into a commitment letter for a senior secured bridge term loan facility and amended its credit agreement.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Euronet Worldwide Inc. Nasdaq: EEFT

Fortive Corp. NYSE: FTV

Microchip Technology Inc. Nasdaq: MCHP

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