Convertibles mostly quiet; HomeAway gains on swap from issue; hedged players lift SanDisk

By Rebecca Melvin

New York, March 28 - Convertibles were pretty quiet on Friday, with some lingering activity in recent new issues - which have held sway among most market players in recent weeks and with ongoing window dressing ahead of quarter end.

HomeAway Inc.'s new 0.125% convertibles, which debuted in the market on Wednesday, traded well again and have gained about 3 points on swap since issue, a syndicate source said.

Friday's action in HomeAway was primarily from outright investors, he said. It was likely linked to those who didn't get the allocations they wanted and they were now buying paper in the secondary market.

SanDisk Corp.'s 1.5% convertibles due 2017 were also heard trading well on Friday, but its activity was tied to the hedged side of the market.

Several of the so-called Chinese names were also seeing some action on Friday. Vipshop Holdings Ltd., which priced a little over two weeks ago, was catching a bid, as were older, 2013 vintage issues such as Qihoo 360 Technology Co. Ltd. and Ctrip.com International Ltd.

"They were finding buyers," a trader said.

Meanwhile, MannKind Corp.'s convertibles were quiet as volatility in the underlying shares of the Valencia, Calif.-based biopharmaceutical company continued ahead of the April 1 Food and Drug Administration meeting to consider regulatory approval of MannKind's inhalable Afrezza diabetes drug.

MannKind shares bounced around on Friday, starting higher but trading down rather sharply. FDA staff briefing documents on Afrezza revealed safety and efficacy concerns, which cast doubt on regulatory approval that has been denied before for this product.

"The latest news doesn't help," a Connecticut-based analyst said about prospects for Afrezza after the briefing documents.

MannKind's 5.75% convertibles due 2015 "haven't traded in three weeks," a Connecticut-based trader said Friday. The bonds were seen last at 109.375, according to Trace data. On Feb. 25, they were around 120.

Equities pared early gains but were able to eke out positive sessions following losses for the two days prior. The Nasdaq stock market ended up just 4.53 points, or 0.1%, at 4,155.76; the S&P 500 stock index ended up 8.58 points, or 0.5%, at 1,857.62; and the Dow Jones industrial average lifted 58.83 points, or 0.4%, to 16,323.06.

HomeAway trades better

The new HomeAway 0.125% bond traded Friday at 102.125 bid, 102.625 offered, with the underlying shares at $38.05.

The bonds were up 3 points on swap versus issue at that level in the low 102s, a trader said.

"There is a lot of outright demand. But it's small volume; it's hard to find supply," the trader said.

Shares of the Austin, Texas-based vacation rental site slipped 15 cents, or 0.4%, to $38.10.

On their first day of trading on Wednesday the bonds were said to be better on swap by about 2.5 points.

The company priced $350 million of five-year notes at the tight end to beyond the tight end of talked terms, pricing with a 35% initial conversion premium, compared to 27.5% to 32.5% premium talk.

Under the call spread, the warrant transactions strike is $81.14, which boosts the premium from the issuer's perspective is 110%.

J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. were the joint bookrunners of the deal, for which there is a $52.5 million over-allotment option.

SanDisk adds on hedge

SanDisk's 1.5% convertibles due 2017 traded higher on Friday and were seen at 163.25 versus an underlying share price of $80.40, a trader said.

That level is about 8.25 points over parity, the trader said.

"They were better," he said, attributing the improvement to a few hedge fund buyers in the market.

Shares of the Sunnyvale, Calif.-based flash storage company edged up $2.13, or 2.7%, to $80.61.

Vipshop catches a bid

Vipshop's 1.5% convertibles due 2019, which priced March 11,were seen at 98.75 versus an underlying share price of $140.00 on Friday.

That level still represented some weakness, as they have lagged below issue on both a swap and outright basis, but the paper was "now catching a bid" and they were active. The activity in the Chinese names was attributed to the high level of volatility.

Shares of the Guangzhou, China-based online discount retailer ended higher by $3.70, or 2.8%, to $138.00.

"They have had some weakness in the last week or so, but they are starting to find buyers," a trader said.

Qihoo and Ctrip are also starting to find buyers amid the volatility, he said.

Vipshop priced an upsized $550 million of the five-year notes. There is also a greenshoe of $82.5 million.

Proceeds are being used to repay debt linked to a recent acquisition and for general corporate purposes.

Mentioned in this article:

Ctrip.com International Ltd. Nasdaq: CTRP

HomeAway Inc. Nasdaq: AWAY

MannKind Corp. Nasdaq: MNKD

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

SanDisk Inc. Nasdaq: SNDK

Vipshop Holdings Ltd. Nasdaq: VIPS

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.