Cypress notes skyrocket on acquisition OK; Whiting Petroleum rebounds; Microchip active

By Abigail W. Adams

Portland, Me., March 10 – The convertible secondary space was firmer on Tuesday with the tone improved as equity markets rebounded from one of their worst days in over a decade.

While equities again saw a volatile session, they roared into the market close with the Dow Jones industrial average ending the day up 4.89%, the S&P 500 index up 4.94% and the Nasdaq Composite up 4.95%.

While pain was felt across the board on Monday, many outright and hedge accounts were holding amid the wild fluctuation in equities with focus on end of the month results, a source said.

“Yesterday there was some pain. The bonds tend to overreact to the downside and don’t initially hold as well as they should,” the source said. “Then today they bounce back.”

While the market was firmer, lot sizes were smaller and bid/ask spreads were wider, a market source said.

However, credit markets were largely unchanged from Monday’s blowout with credit sensitive names continuing to suffer.

While the major price movements were on Monday, Cypress Semiconductor Corp.’s convertible notes were in focus during Tuesday’s session as stock skyrocketed following regulatory approval for Infineon Technologies AG’s takeover of the company.

Microchip Technology Inc.’s convertible notes were also among Monday’s volume movers as stock rebounded.

Whiting Petroleum Corp.’s 1.25% convertible notes due April 1, 2020 staged a substantial rebound with the notes up more than 30 points after plummeting more than 60 on Monday.

Cypress jumps outright

Cypress Semiconductor’s convertible notes were again in focus on Tuesday as stock skyrocketed following regulatory approval for Infineon’s takeover of the company.

The 4.5% convertible notes due 2022 jumped more than 30 points outright with stock up more than 45%.

They were changing hands at 166.375 early in the session and 169.25 in the late afternoon, sources said. The bonds saw more than $15 million in reported volume.

While volume was light, Cypress Semiconductor’s 2% convertible notes due 2023 jumped 13 points outright to 119.625.

Cypress stock traded to a low of $22.00 and a high of $22.76 before closing out the day at $22.75, an increase of 48.89%.

Less than one week after Cypress stock tanked due to news reports that Infineon’s takeover of the company might not be approved, the Committee on Foreign Investment in the United States approved the acquisition.

The acquisition now must garner regulatory approval from China before it can close.

Infineon, a German semiconductor company, plans to acquire Cypress for $23.85 a share in an all-cash transaction that values the San Jose-based semiconductor company at $10 billion.

If the acquisition is completed, holders of Cypress’ convertible notes will be able to convert or exchange the convertible notes for cash for an amount that will equal the merger share price multiplied by the applicable conversion rate.

The notes will also become putable at the fundamental change repurchase price, according to the merger agreement.

Whiting Petroleum bid up

Whiting Petroleum’s 1.25% convertible notes, which mature in 20 days, staged a substantial rebound on Tuesday after bottoming out the previous session.

While volume was light, the 1.25% notes traded as high as 68 on Tuesday.

They were changing hands in the low 20s on Monday after closing out the previous week in the low 80s.

With the due date of the convertible notes fast approaching, there is a sentiment that Whiting Petroleum’s senior creditors will not allow the convertible note to be paid off without a fight, a market source said.

With the annihilation of oil futures on Monday, many were under the assumption that a bankruptcy filing from the company may be imminent.

However, with the yield over 1,000%, it would be a significant return if the notes do get paid off, a source said.

There are $262 million of the 1.25% notes outstanding, according to Trace data.

Microchip active

Microchip Technology’s convertible notes were active on Tuesday as stock rebounded after a more than 10% drop on Monday, a market source said.

Microchip’s 1.625% convertible notes due 2027 traded up to 117.75 on Tuesday, according to a market source.

The notes sank to 114 on Monday after closing out last week in the mid-120s.

There was more than $15 million in reported volume during Monday’s session.

Microchip’s 1.625% convertible notes due 2025 were changing hands at 161.75 Tuesday afternoon.

The notes dropped to the low 160s on Monday after closing out the previous week around 180.

Microchip stock traded to a low of $76.05 and a high of $82.00 before closing Tuesday at $81.48, an increase of 4.52%.

Mentioned in this article:

Cypress Semiconductor Corp. Nasdaq: CY

Microchip Technology Inc. Nasdaq: MCHP

Whiting Petroleum Corp. NYSE: WLL

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