Universal American convertibles quiet in aftermarket; Tesla drops on swap, SolarCity jumps

By Rebecca Melvin

New York, June 22 – Despite Universal American Corp.’s new $115 million issue of 4% convertibles in the market on Wednesday, the attention of most market players was turned to news that electric car maker Tesla Motors Inc. has offered to buy SolarCity Corp. for $26.50 to $28.50 per share, or about $2.6 billion to $2.8 billion.

Tesla’s convertibles slumped on both an outright and dollar-neutral, or hedged, basis in response to the news, but new life was breathed into SolarCity’s convertibles.

Tesla’s chief executive officer, Elon Musk, is also chairman of SolarCity, and he owns 19% of Tesla and 22% of SolarCity. Musk has recused himself from voting on the deal. But many market players still viewed it as “a little shameless” and as having “no real strategic play.”

The Tesla 1.25% convertibles, or the B convertibles, dropped the most on swap, down 3 points.

It’s piling on a lot of SolarCity debt ahead of the Tesla B convertibles, which mature in 2021, a New York-based trader noted.

“You are putting SolarCity debt before that tranche,” the trader said.

Meanwhile, Universal American’s new 4% convertibles were not heard in trade Wednesday after the White Plains, N.Y.-based health care company launched $100 million of the five-year senior notes with a $15 million greenshoe late Tuesday for pricing ahead of the market open on Wednesday. The deal came at terms that had been fixed before marketing. Shares of Universal American fell 7.5%.

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