Convertibles see positive tone; Greenbrier adds 3 points since issue; Medicines extends gains

By Rebecca Melvin

New York, Feb. 6 – The convertible bond market was quiet on Monday amid a lull in earnings reports released from the companies that issue convertibles, but the market continued to see a positive tone as recently improved new issuance and rising stocks continue to boost confidence, a New York-based trader said.

The earnings season is “smack dab in the middle” for convertibles players, so there wasn’t much driving trading action on Monday, but there will be another flurry of reports before the season is over, the trader said.

Meanwhile, market participants remain bullish on equities going higher given expectations for a business-friendly regulatory environment. That is lending a bid to the markets, as is new issuance, which is 250% better, compared to the same period last year, the trader said.

Not only is the pace of issuance improved, but new deals are getting upsized, there are repricings to the upside and the new issues are trading strongly upon release for secondary-market dealings.

One of last week’s new issues, Greenbrier Cos. Inc.’s 2.875% convertible senior notes due 2024, was seen around 104.5 early Monday, representing an expansion of 3 points on a dollar-neutral, or hedged, basis since its debut. Greenbrier upsized the base deal to $250 million from $175 million. The greenshoe was later exercised, increasing the deal to $275 million.

Back in established issues, Medicines Co.’s convertibles improved again in active trade on the heels of strong gains on Friday after positive drug study news on an Amgen cholesterol drug helped the maker of a rival product.

Elsewhere, trading volumes were generally soft, but there was continued strong action in Weatherford International plc. Its exchangeable senior notes were up another 0.5 point dollar neutral on Monday despite the weaker oil market. The Weatherford bond has expanded 3 points on a dollar-neutral basis since it reported earnings last week.

However, other energy-sector convertible paper was quiet on Monday, a trader said.

Medicines extends gains

Medicines’ 2.75% convertibles due 2023 moved up another 0.75 point on a dollar-neutral basis on Monday, trading at around 119, a trader said.

Shares of the Parsippany, N.J.-based biotechnology company moved up another $1.31, or 2.9%, to $47.27.

Medicines also has a 1.375% convertible, but there is only $55 million left outstanding in that issue, and it was not trading actively.

The move was related to news that Amgen’s LDL cholesterol drug Repatha stemmed cardiac upsets.

Medicines has a drug that is a different class of inhibitor, but it may be able to side-step issues its rivals have had.

“There was a lot of MDCO trading,” a source said on Monday.

On Friday, the Medicines 2.5% convertible notes due 2022 jumped nearly 22 points to 149.25 and the 1.375% convertibles due in June improved over 23 points to around 166.5, while the underlying stock added $7.96, or 20.95%, to $45.96.

Weatherford adds again

Weatherford’s 5.875% exchangeable senior notes due 2021 were up another point on an outright basis to between 124.375 and 124.875 on Monday, compared to trades with a 123 handle late Friday, which was a gain of 3 to 4 points on the day.

That was a gain of 0.5 point on a dollar-neutral basis. Meanwhile, shares were initially higher to between $6.14 and $6.23, but they ended lower at $6.00, which was down 14 cents, or 2.3%.

The moves higher were prompted by the Switzerland-based oil services company’s reported revenue, which was better sequentially, but down from the year-earlier period and a loss that was narrower-than-expected.

Mentioned in this article:

Greenbrier Cos. Inc. NYSE: GBX

The Medicines Co. Nasdaq: MDCO

Weatherford International plc NYSE: WFT

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