Marriott Vacations active on ILG acquisition; Arconic expands; Molina notes volatile

By Abigail W. Adams

Portland, Me., April 30 – The convertibles secondary market was quiet on Monday with only $244 million on the tape by late afternoon.

While the typical volume movers and recently priced paper was slow to trade on Monday, company news and earnings reports pushed long-standing issuances into the spotlight.

Marriott Vacations WorldWide Corp.’s 1.5% convertible notes due 2022 were the major volume movers of the session with $14 million in trades by late afternoon. While the notes were active, they were relatively unchanged dollar neutral as company stock tanked after it announced it would acquire ILG Inc. for $4.7 billion.

Arconic Inc.’s 1.625% convertible notes due 2019 were also active and expanding on Monday as the Pittsburg-based precision aluminum products maker’s stock dropped after it cut its forward guidance due to the rising cost of aluminum.

Molina Healthcare Inc.’s 1.125% convertible notes due 2020 and 1.625% convertible notes due 2044 were volatile alongside stock after the Long Beach, Calif.-based managed care company reported first-quarter earnings prior to the market open Monday.

Clovis Oncology Inc.’s recently priced 1.25% convertible notes due 2025 continued to trade down on Monday with the notes reaching a new low of 90.5, a market source said.

“People are licking their wounds over that one,” the source said.

Marriott dominates

Marriott’s 1.5% convertible notes due 2022 were the major volume movers of Monday’s session with $14 million on the tape by late afternoon.

The notes were down about 5 points outright but relatively unchanged dollar neutral on a 60% delta, a market source said.

They were seen trading at 105.761 versus an equity price of $121.63 late in the afternoon. Marriott Vacations’ stock closed Monday at $122.755, a decrease of 8.68%.

More than 3 million shares traded during Monday’s session versus the average daily volume of about 176,000.

Marriott Vacations announced Monday morning it would acquire ILG Inc. in a cash and stock transaction valued at $4.7 billion, according to a company news release.

ILG shareholders will receive $14.75 in cash and 0.165 of a share in Marriott for each ILG share. Activist investor FrontFour Capital has urged the Miami-based timeshare operator to merge with Marriott since last year, Bloomberg reported.

Arconic expands

Arconic’s 1.625% convertible notes due 2019 were expanding on Monday as the aluminum manufacturer’s stock tanked after reporting earning prior to the market open.

The 1.625% notes were down about 4 points outright. They were seen trading at 100.5 versus an equity price of $18.32.

The notes were up a couple points dollar neutral, a market source said. Arconic stock closed Monday at $17.80, a decrease of 20.68%.

Arconic reported first-quarter earnings prior to the market open on Monday. Despite beating analyst expectations for revenue and earnings per share, the manufacturer of aluminum products reduced its forward guidance due to the increased cost of aluminum.

Arconic reported revenues of $3.45 billion and adjusted earnings per share of 34 cents, which beat analyst expectations of revenue of $3.33 billion and an adjusted earnings per share of 32 cents.

However, Arconic lowered its 2018 guidance to an earnings per share of $1.17 to $1.27 from $1.45 to $1.55 per share. The guidance was revised due to the rising cost of aluminum, according to a company news release.

The guidance assumes an average aluminum price of $2,660 per metric ton, which is a $500 increase from the 2017 average, thestreet.com reported.

President Donald Trump imposed a 10% tariff on imported aluminum in March and has yet to decide whether any countries will be granted an exemption.

Arconic affiliate Alcoa was one of 114 aluminum companies that signed a letter urging Trump to extend tariff exemptions to Canada, Europe and other foreign producers, CNBC reported.

Molina active

Molina Healthcare’s convertible notes were volatile alongside stock on Monday after the Long Beach, Calif.-based managed care company reported first-quarter earnings prior to the market open on Monday.

Molina’s 1.625% convertible notes rose about 10 points outright to trade at 155.625 in large volume trades early in the session. However, the notes sank 10 points in small tract trades later in the afternoon to close the day at 144.5, according to Trace data.

Molina’s 1.125% convertible notes due 2020 rose about 12 points to trade just south of 223 early in the session. However, the 1.125% notes dropped more than 15 points to close the day around 207.5, according to Trace data.

Molina stock traded to a high of $91.15 and a low of $82.91 before closing the day at $83.25, a decrease of 1.96%.

Molina reported earnings per share of $1.64, which beat analyst expectations of 77 cents per share. Molina also increased its 2018 guidance by $1 to $4.24 to $4.74. The earnings results beat analyst expectations by a wide margin.

Molina Healthcare was hit with a class action lawsuit filed on behalf of the Steamfitters Local 449 Pension Plan on Monday.

The lawsuit alleges that between 2014 and 2017 Molina misled investors about the ability of its administrative infrastructure to support rapid growth into Medicaid and Affordable Care Act marketplaces, according to a news release from Steamfitters 449 representative Labaton Sucharow LLP.

Clovis’ new low

Clovis Oncology’s recently priced 1.25% convertible notes due 2025 continued to trade down on Monday with the notes seen at 90.5, its lowest point since pricing on April 16. Clovis stock also continued to drop Monday, closing the day at $43.38, a decrease of 4.89%.

While the notes were well received on their market debut and expanded about 1.25 points dollar neutral, that soon changed with the notes contracting the following week by 1.75 points.

The notes were little changed on a dollar-neutral basis and remained contracted, a source said.

Mentioned in this article:

Arconic Inc. NYSE: ARNC

Clovis Oncology Inc. Nasdaq: CLVS

Marriott Vacations WorldWide Corp. NYSE: VAC

Molina Healthcare Inc. NYSE: MOH

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