Morning Commentary: GT Advanced surges on Apple pact; Yahoo! adds outright after earnings

By Rebecca Melvin

New York, Oct. 22 – GT Advanced Technologies Inc.’s convertibles surged early Wednesday – marking the second straight day of gains and more than doubling the securities’ pricing – after news that the bankrupt Merrimack, N.H.-based solar and LED equipment company has inked an agreement with Apple Inc. that improves the prospects for recovery for bond investors.

“Apple’s claim is being satisfied by the sale of the furnaces only. So the convert holders get the value of the solar business,” a Connecticut-based trader said.

GT Advanced’s 3% convertibles due 2020 changed hands at 43 early Wednesday, according to Trace data, and were seen at 42 bid, 46 offered, a trader said. Those bonds traded at 21 on Monday.

The GT Advanced 3% convertibles due 2017 traded at 45 early Wednesday, which was up 16.25 points on the day, according to Trace data. These bonds were also around 21 early in the week.

The two bonds were among the most actively traded of the early session.

GT Advanced’s Chapter 11 bankruptcy protection filing this month shocked convertibles players, who said there was no warning of anything amiss that would have resulted in a filing.

But Apple decided against using a synthetic sapphire-screen material for its smart phones and other devices, which it had helped GT Advanced begin to produce. The bankruptcy move took the company’s shares to essentially zero from about $13.00 overnight.

Elsewhere, Yahoo! Inc.’s 0% convertibles due 2018 traded up a point on an outright basis to about 104.67, according to Trace data. Yahoo! posted earnings that were better than expected, and shares added $2.30, or 5.7%, to $42.48 in the early going.

But Red Hat Inc.’s 0.25% convertibles due 2019 slipped 0.25 point on a hedged basis early Wednesday, a New York-based trader said.

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