Illumina convertible notes active; One Medical drifts lower; LCI Industries holds gains

By Abigail W. Adams

Portland, Me., July 25 – It was a quiet day in the convertibles secondary space with volume light and uncertainty high as the market awaits another historic rate increase from the Federal Reserve on Wednesday.

Equity indexes were mixed as debates rage over inflation, recession and the pace of the Federal Reserve’s rate hike schedule.

While negative for much of the afternoon, a surge of late session buying pushed the Dow Jones industrial average and the S&P 500 index into positive territory.

The Dow closed Monday up 90.75 points, or 0.28%, the S&P 500 index closed up 0.31%, and the Russell 2000 index closed up 0.31%.

While the Nasdaq Composite index remained in the red, it pared its losses into the close, ending the day down 0.43%.

There was $40 million in reported volume about one hour into the session and $300 million on the tape about one hour before the market close.

1Life Healthcare Inc.’s (One Medical) 3% convertible notes due 2025 continued to drift lower in active trading after surging the previous week following news Amazon would acquire the health care technology company.

Illumina Inc.’s 0% convertible notes due Aug. 18, 2023 (BBB) saw heavy volume with the short-duration notes offering an attractive yield play.

LCI Industries’ 1.125% convertible notes due 2026 were active with the notes holding onto the strong gains made the previous week.

Illumina’s yield

Illumina’s 0% convertible notes due Aug. 18, 2023 were among the most actively traded issues on a quiet summer Monday in the secondary space.

While active, there was little movement in price.

The investment-grade notes continued to trade on a 95-handle.

They were changing hands at 95.5 in the late afternoon with a yield of 4.4%.

There was $18 million in reported volume.

The 0% notes have little to no call optionality with the notes maturing in less than one year and the conversion premium 128%, sources said.

However, the notes offer an attractive yield even amid rising rates with the one-year Treasury Bill settling Monday with a yield of 3.041%.

One Medical active

One Medical’s 3% convertible notes due 2025 continued to drift lower in active trading with the timeline of Amazon’s takeover of the company in question.

The notes were changing hands at just shy of 97.875 early in Monday’s session.

They were seen at 97.625 in the late afternoon.

There was $14 million in reported volume.

One Medical’s stock traded to a high of $17.12 and a low of $16.93 before closing the day at $16.97, a decrease of 1.05%.

News broke late last week that Amazon would acquire One Medical for $18.00 per share, including debt, in an all-cash transaction.

The notes surged 11 points outright and 7 points on a dollar-neutral, or hedged, basis on the news to trade as high as a 98-handle.

While the notes will be taken out at par in the acquisition, they have drifted lower over the past two sessions.

The notes were seen as trading rich on a 98-handle given the amount of time that may be involved in Amazon closing the transaction, sources said.

LCI holds gains

LCI Industries’ 1.125% convertible notes due 2026 were holding on to strong gains made the previous week in active trading on Monday.

The 1.125% notes continued to trade on a 96-handle.

They were trading at 96.625 versus a stock price of $130.74 in the late afternoon.

There was $10 million in reported volume.

LCI Industries’ stock traded to a high of $131.92 and a low of $128.66 before closing the day at $130.18, an increase of 0.29%.

LCI’s convertible notes have gained 4 points outright with stock up a little more than 7% over the past week.

The manufacturer of component pieces for recreational vehicles is scheduled to report earnings on Aug. 2.

Mentioned in this article:

1Life Healthcare Inc. Nasdaq: ONEM

Illumina Inc. Nasdaq: ILMN

LCI Industries NYSE: LCII

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