Convertible bond market follows equity space lower; Arconic slides; Weatherford weaker

By Stephanie N. Rotondo

Seattle, June 27 – Activity in the convertible bond market on Tuesday improved over Monday’s session, but only with a few spots of news to act as a catalyst.

ServiceNow Inc.’s 0% convertible notes due 2022, for instance, were on the active side, though there was no fresh news to explain the liquidity.

Initially, the convertibles bucked the day’s downward trend, rising almost ½ point to around 103.75, according to one source. However, by day’s end the bonds were deemed unchanged, straddling 103.

The company’s shares (NYSE: NOW) were slightly lower in early trading.

Meanwhile, Tesla Inc.’s convertibles were feeling under the weather, given pressure in both the automotive and technology arenas.

A source pegged the 2.375% convertible notes due 2022 around 128.75, a loss of over ½ point. The 0.25% convertible notes due 2019 were meantime seen just south of 117, off about ¼ point.

At another desk, the 2.375% convertibles were seen in a 128 to 129 context, a loss of 1 to 2 points on the day. The 0.25% convertibles were called about 3 points lower at 114.5.

And the 1.25% convertible notes due 2021 closed in a 116 to 117 range, off 2 to 3 points, according to the source.

The source noted that there were trades lower than that level during the course of the day.

Tesla’s equity was down $15.12, or 4.01%, at $362.37.

As for names that were moved by news, Arconic Inc.’s 5.375% series 1 class B mandatory convertible preferreds (NYSE: ARNCPrB) were in retreat, as was the company’s stock. For its part, the stock began to go downhill on Monday when the company confirmed that one of its products was included in the cladding deemed responsible for the Grenfell Tower Fire on June 14.

Also trading lower were Weatherford International plc’s 5.875% exchangeable senior notes due 2021. The weakness in the issue came in the wake of a $250 million offering of 9.875% senior notes due 2024 on Monday.

Arconic loses ground

Arconic’s 5.375% mandatory convertible preferreds were weaker on Tuesday, trending lower with the underlying equity.

The preferreds fell $3.17, or 8.40%, to $34.55. The common stock meantime dropped $2.17, or 9.04%, to $21.84.

It was the second consecutive day of losses for Arconic following the company’s confirmation on Monday that one of its products, Reynobond PE, was used in the cladding system of Grenfell Tower. However, the company was quick to point out that it was one of many components used by its customer, the fabricator of the cladding.

Arconic also noted that “the use of aluminum composite material in various architectural applications” is allowed for in certain circumstances. Furthermore, Arconic only sells the product with the expectation that those using it will conform to local building codes.

That being said, Arconic said in a statement that it will no longer supply the product for any high-rise application, regardless of local codes and regulations.

Based in New York, Arconic was formerly known as Alcoa Inc.

Weatherford wanes

Weatherford’s 5.875% exchangeable senior notes were trading lower on Tuesday in the wake of the company’s Rule 144A offering of $250 million of 9.875% senior notes due 2024 on Monday.

A source said the notes opened at 101.5, but ended closer to par.

The notes were seen around 100.75 at mid-morning.

As for the company’s shares, they declined 4 cents, or 1.04%, to $3.81.

Proceeds from the offering – an add-on to a previously priced $540 million issue – will be used to repay amounts outstanding under the company’s revolving credit facility, to provide additional liquidity through 2017 and provide assurance that the company will comply with the financial covenants set forth in its senior revolving and term loan credit facilities.

Mentioned in this article:

Arconic Inc. NYSE: ARNC

ServiceNow Inc. NYSE: NOW

Tesla Inc. Nasdaq: TSLA

Weatherford International plc NYSE: WFT

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