Yahoo! slips on hedge; U.S. Steel gains; XenoPort, Performant Financial offerings on tap

By Rebecca Melvin

New York, Jan. 28 – Yahoo! Inc.’s convertibles moved higher on an outright basis early Wednesday in tandem with better shares, but they contracted on a dollar-neutral, or hedged, basis. And that same paper came off on an outright basis later in the session amid a reversal in shares as well as the broader equity markets.

Initially, the Yahoo! convertibles were boosted by news that the Sunnyvale, Calif.-based internet company is spinning off its remaining stake in Alibaba Group Holding Ltd. in to a separate company. Shares were up initially by 5%.

But a turnaround in shares coincided with a reversal in the overall equity market and on the heels of the company’s disappointing fourth-quarter earnings on lower revenue. Shares closed lower by 3%.

Moving in the opposite direction, United States Steel Corp.’s convertibles surged on an outright basis and they expanded by about 0.5 point on a dollar-neutral basis as shares of the Pittsburgh-based steelmaker popped 11% on lower fourth-quarter net income that beat estimates.

After the market close, two small deals were launched for pricing on Thursday. XenoPort Inc. launched an overnight offering of $100 million of seven-year convertible senior notes. Performant Financial Corp. launched a deal for $80 million of five-year convertibles bonds in a registered offering that is coming together with about $50 million of common stock.

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