Intel flat on swap after tepid guidance; Nvidia little changed; Golden Ocean adds on debut

By Rebecca Melvin

New York, Jan. 17 - Intel Corp.'s two large convertible issues traded down on an outright basis Friday, but were unchanged, or flat, on a hedged basis after the Santa Clara, Calif.-based chip giant reported fourth-quarter results that included disappointing guidance for the current quarter and 2014.

For the current year, Intel said revenue was expected to be flat, which was below expectations for about 1.2% revenue growth.

Also in the technology space, Nvidia Corp. moved up in early action but ended little changed as the underlying shares initially traded up but then weakened during the session.

Technology was a sector that was active, a New York-based trader said. But overall the U.S. convertibles secondary market was pretty quiet against a backdrop of mixed underlying equities and ahead of the three-day holiday weekend in observance of Martin Luther King Jr. day.

"We've been trading tech. We've been reasonably active," the trader said. "But with the holiday, we're not terribly busy."

Detour Gold Corp.'s 5% convertibles due 2017, which surfaced in trade earlier this week, were up at 85 as they remained a focus of traders watching the miners that are "starving for cash, but have good assets and are priced at distressed levels," a New York-based trader said.

News Monday that Goldcorp Inc. was acquiring smaller rival Osisko Mining Corp. put the sector on watch for potential sector consolidation.

The U.S. primary market was quiet, but internationally, Golden Ocean Group Ltd.'s newly priced 3.07% convertibles traded up on their debut to 101.75 bid, 102.5 offered in decent action Friday after the dry bulk shipper priced $200 million of the five-year convertibles in a Regulation S deal.

Investors in the Golden Ocean issue were evenly split between outrights and hedge funds, and the book was well covered by interest from "all over the world," a syndicate source said.

Intel bonds flat on hedge

Intel's newer 3.25% convertibles due 2039 traded at 134.75 early Friday, which was down about 3.5 points outright on the day, according to Trace data.

Intel's 2.95% convertibles due 2035 also traded actively and were seen at 113.125, which was down 1.6 points, according to Trace data.

Both bonds were lower on an outright basis but flat on a hedged basis, a New York-based trader said. The trader said the Intel 3.25% bonds trade on about a 70% delta and Intel's 2.95% convertibles trade on about a 50% delta.

Intel shares ended the day down 69 cents, or 2.6%, at $25.85. During the session, they had been down by as much as 4.8%.

Even with the lower prints, the Intel 2.95% convertible was higher than it was a week ago when it printed at 112.5, up from 111.5 on Thursday.

Intel was a very active name in the convert market this past week in the lead up to earnings.

On Tuesday J.P. Morgan Securities LLC upgraded the stock to "overweight" from "neutral" and increased its price target to $29.00 from $20.00.

In support of his actions, the JPMorgan analyst said he thinks the PC market will remain relatively stable this year and that Brian Krzanich, the company's new chief executive, will provide focused leadership, driving better margins and returns. Intel dominates volume.

Later Thursday Intel reported profit for the quarter ended Dec. 28 at $2.63 billion, or 51 cents a share, compared with profit in the year-earlier period of $2.47 billion, or 48 cents a share.

Revenue rose to $13.83 billion from $13.48 billion. Analysts had expected earnings of 52 cents per share on revenue of $13.7 billion. In the current quarter, Intel projected a revenue range of $12.8 billion, plus or minus $500 million. Analysts were looking for revenue of $12.79 billion.

Nvidia little changed

Nvidia's 1% convertibles due 2018 traded fairly actively on Friday and ended the session at 102.75 bid, 103.125 offered versus an underlying share price of $16.00, which was little changed.

Shares of the Santa Clara, Calif.-based graphics processor company ended down 7 cents, or 0.4%, at $15.99.

The bonds didn't move that much, a New York-based sellsider said.

New Golden Ocean adds

Golden Ocean priced $200 million of five-year convertible bonds at par to yield 3.07% with a 32.5% initial conversion premium, a syndicate source said.

The new bonds traded up on their market debut Friday to 101.75 bid, 102.5 offered versus $2.16, which was the stock reference price.

"We made sure it was reasonably priced at the mids, and it looks like we could have done more," the source said, indicating that pricing could have come more toward the richer, or more aggressive, end of terms.

The deal's $25 million greenshoe was exercised simultaneously with pricing of the $175 million base deal.

The conversion price of the bonds in U.S. dollars was set at $2.86. The reference stock price was NOK 13.3214, or $2.16, based on an exchange rate of NOK 6.1612.

ABG Sundal Collier Norge ASA and BNP Paribas were joint bookrunners of the offering.

Golden Ocean is a dry bulk shipping company incorporated in Hamilton, Bermuda.

Mentioned in this article:

Detour Gold Corp. Toronto: DGC

Goldcorp Inc. NYSE: GG

Golden Ocean Group Ltd. Norway: GOGL

Intel Corp. Nasdaq: INTC

Nvidia Corp. Nasdaq: NVDA

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