Convertibles generally quiet; Macquarie Infrastructure on tap; Chinese internet paper eyed

By Rebecca Melvin

New York, July 7 – U.S. convertibles put in a quiet session on Monday with more offers than bids and not much trading as market players returned to their screens following the long holiday weekend in observance of U.S. Independence Day. Financial markets closed early on Thursday and remained closed on Friday.

Several traders said that they didn’t really focus on markets on Monday and that many players were still on vacation.

After the market close, Macquarie Infrastructure Co. LLC launched an offering of $250 million of five-year convertible senior notes that were seen pricing on Wednesday together with 10 million shares of common stock.

New York-based Macquarie owns, operates and invests in a diversified group of infrastructure businesses that provide basic services.

Back in established issues, Intel Corp. and WellPoint Inc. were among the most active names in a market that saw generally thin volume.

Intel’s 2.95% convertibles due 2035 changed hands at 125.525, which was 0.6 point higher than the previous level, according to Trace data. Shares of the Santa Clara, Calif.-based chipmaker traded as high as $31.20 early Monday but were last down 0.5% at $30.97.

Also in the chipmaker space, Micron Technology Inc.’s 3% convertibles due 2043 were seeing a 132 bid versus a share price of $34.05, according to a market player early in the session.

Trace data reported that the Micron convertibles had traded at 129.375, which was down a couple of points on an outright basis. Shares of the Boise, Idaho-based chipmaker were slipping in the early going and closed the session down 2.6% at $32.86.

Chinese internet names also remained in focus, as market players eye ongoing volatility in the space.

Among the convertible names of interest are Vipshop Holdings Ltd., SINA Corp., E-House China Holdings Ltd. and NQ Mobile Inc., which saw its shares slip another dime, or 2%, to $4.48, following a 32% plunge on Thursday.

Shares of the Beijing- and Dallas-based mobile software company plunged after news that its independent auditor has asked to expand the scope of its work in examining the company’s financials.

Akorn Inc. wasn’t really in trade, but its convertibles were called “0.5 point to 1.5 points,” according to one trader. Shares of the Buffalo Grove, Ill.-based pharmaceutical company underperformed the market, ending down $1.33, or nearly 4%, at $32.60.

Meanwhile, GT Advanced Technologies Inc.’s two issues of 3% convertibles were indicated lower on an outright basis against a 16% slide in the underlying shares of the Merrimack, N.H.-based solar and LED equipment company to $16.50.

GT Advanced’s older 3% convertibles due 2017 were indicated down to 225 from about 261. And its newer 3% convertibles due 2020 were seen down to 167 from 181 to 182.

Causing the slide in GT Advanced’s securities were downgrades of the company’s shares by UBS and Canaccord.

UBS downgraded the GT Advanced shares to “neutral” from “buy” but maintained a $22.00 price target based on the expectation that the company will not meet the high end of its $600 million to $800 million 2014 second-quarter sales guidance.

UBS also lowered its 2014 earnings per share target to 12 cents per share from 17 cents.

Looking ahead

With summer in full swing following the July 4 holiday, one New York-based trader was anticipating that trading and new issues would tail off considerably. Even the beginning of earnings season was not seen as providing too much stimulus to the market, the trader said.

Trading action is going to come “almost exclusively from earnings news that creates big swings in shares,” the trader said.

Other than that, it will be quiet. “Issuance is going to fall off with earnings reporting. Many companies are in their quiet periods now,” the trader said.

“The deals kept things going in June, but for July and August it’s going to be quiet,” the trader said.

Macquarie to price

Macquarie plans to price $250 million of five-year convertibles that were talked at a 2.875% to 3.375% coupon and a 17.5% to 22.5% initial conversion premium.

Macquarie is using the financing to purchase the 50% interest in International Matex Tank Terminals, a bulk liquid storage terminal business, which it doesn’t already own.

The International Matex Tank Terminals provides bulk liquid storage and handling services at 10 marine terminals in the United States and two in Canada.

Macquarie also has full-service gas energy businesses and cooling systems businesses and two solar power generation facilities totaling 30 megawatts in the southwestern United States.

The deal is coming together with 10 million shares of common stock, which will raise about $600 million, for a total capital raise of about $850 million.

The convertibles are non-callable for life and mature July 15, 2019.

Joint bookrunning managers of the deal are Barclays, J.P. Morgan Securities LLC, RBC Capital Markets LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC.

Co-managers are BofA Merrill Lynch and Oppenheimer & Co. The notes will not be listed on any securities exchange.

Mentioned in this article:

Akorn Inc. Nasdaq: AKRX

E-House China Holdings Ltd. NYSE: EJ

GT Advanced Technologies Inc. Nasdaq: GTAT

Intel Corp. Nasdaq: INTC

Macquarie Infrastructure Co. LLC NYSE: MIC

Micron Technology Inc. NYSE: MU

NQ Mobile Inc. NYSE: NQ

SINA Corp. Nasdaq: SINA

Vipshop Holdings Ltd. Nasdaq: VIPS

WellPoint Inc. NYSE: WLP

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