Illumina, Euronet Worldwide convertibles improve; Dycom Industries launches buyback

By Abigail W. Adams

Portland, Me., March 25 – While several sectors in the convertibles secondary space continued to suffer on Wednesday, the overall market again improved as equity indexes rallied in intraday trading.

However, volatility continued to siderail risk assets with indexes paring their gains and closing Wednesday mixed.

The Dow Jones industrial average closed the day up 2.39% and the S&P 500 index closed up 1.15%.

However, the Nasdaq composite slid into negative territory in the final minutes of Wednesday’s session and closed the day down 0.45%.

While Congress’ historic $2 trillion stimulus bill helped assuage nervous investors fleeing risk assets for the majority of the session, concern the bill may hit some last-minute stumbling blocks that will prevent its passage caused equities to trade off their highs late in the session.

Despite the continued seesaw of equity markets, the convertibles secondary space saw more buyers return to the market.

There was more swap trading on Wednesday than there has been in the past few weeks, a source said.

“They’re coming out of the woodwork now,” the source said.

There was $74 million in reported volume about one hour into Wednesday’s session and $571 million heading into the market close.

Illumina Inc.’s 0% convertible notes due 2023 saw high-volume activity with the notes improving on both an outright and dollar-neutral basis.

Euronet Worldwide Inc.’s 0.75% convertible notes due 2049 also improved in high-volume activity.

Dycom Industries Inc.’s 0.75% convertible notes due 2021 were active following a privately negotiated buyback of a portion of the notes and a drawdown from its credit facility.

Illumina improves

Illumina’s 0% convertible notes due 2023 continued to see high-volume activity on Wednesday with the notes improving on both an outright and dollar-neutral basis.

The 0% convertible notes due 2023 were trading off their lows.

They traded up to 93.125 on Wednesday with stock down as much as 2% in intraday trading.

The notes gained about 0.5 to 0.75 point dollar-neutral on Wednesday, a market source said.

However, they were still contracted several points from their highs, sources said.

The 0% notes saw more than $35 million in reported volume during Wednesday’s session.

Illumina stock traded to a high of $259.21 and a low of $247.31 before closing the day at $248.32, a decrease of 2.31%.

While the notes improved on Wednesday, they were still changing hands at unheard of prices for investment-grade paper, sources said.

The notes bottomed out at 90 late last week.

Euronet rebounds

Euronet Worldwide’s 0.75% convertible notes due 2021 improved on Wednesday with the investment-grade paper also bouncing off their lows.

The 0.75% notes traded up 2.5 points outright to 91 in the late afternoon, according to a market source.

The bonds were among the most actively traded in the secondary space with more than $36 million in reported volume.

Euronet stock traded to a low of $74.70 and a high of $89.46 before closing the day at $87.24, an increase of 7.66%.

The notes traded as low as 85.5 late last week.

Dycom’s buyback

Dycom Industries’ 0.75% convertible notes due 2021 were active on Wednesday after the company announced a buyback of a portion of the principal amount of the notes.

The 0.75% notes dropped 6.5 points outright to 81.5 early Wednesday, according to a market source.

They traded as high as 83 in the mid-afternoon and were changing hands at 82.5 heading into the market close.

The short-duration notes were trading with a yield of 14.4%, according to a market source.

The 0.75% notes saw more than $16 million in reported volume.

The notes jumped more than 12 points outright on Tuesday to 87.75.

Dycom announced after the market close on Tuesday plans to repurchase up to $157 million in principal of the 0.75% notes for $138 million in privately negotiated transactions, Prospect News reported.

The notes were being bought back at a purchase price of 88, a source said.

To partially fund the buyback, Dycom drew down $650 million from its $750 million revolving credit facility last week.

While the drawdown increased the amount of debt on Dycom’s balance sheet, the credit facility mandates the company to retire or refinance the convertible notes before it can do anything else, a source said.

While there were previous questions about whether the company would be able to redeem or refinance the soon-to-mature notes, the drawdown and the buyback increased the likelihood that they would, a source said.

Prior to the buyback, the 0.75% notes had $485 million outstanding, according to Trace data.

Mentioned in this article:

Dycom Industries Inc. NYSE: DY

Euronet Worldwide Inc. Nasdaq: EEFT

Illumina Inc. Nasdaq: ILMN

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