Morning Commentary: Convertibles quiet ahead of Labor Day weekend; Salesforce comes in slightly

By Rebecca Melvin

New York, Sept. 1 – U.S. convertibles were trading quietly on the first day of September on Thursday and ahead of the Labor Day holiday weekend. Financial markets will be closed on Monday.

There was a bit of activity in some names related to news that was also moving their underlying shares, a New York-based trader said.

Salesforce.com Inc.’s 0.25% convertibles due 2018 contracted slightly on the way down with lower shares after the cloud software company reported a disappointing outlook amid a rise in revenue.

For its second-quarter, Salesforce swung to a profit on a 25% gain in revenue, but it gave a disappointing outlook for the current quarter saying there was some softness in its U.S. markets.

The Salesforce 0.25% convertibles traded at 124.25 against shares that dropped 6.5% to 7%, the trader said. The Salesforce shares were last down $4.86, or 6%, to $74.55.

In Europe, Inmarsat plc priced an upsized $650 million of seven-year convertible bonds at par to yield 3.875% with an initial conversion premium of 32.5%.

The Regulation S deal, sold via joint bookrunners Credit Suisse and JPMorgan with BofA Merrill Lynch as a co-bookrunner, was initially talked at $550 million in size with a $50 million greenshoe.

Pricing came toward the rich end of 3.625% to 4.125% coupon talk and at the midpoint of 30% to 35% premium talk.

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