SanDisk adds on swap; Icahn gets tenders for 68% of Vivus bonds; SunEdison stays in focus

By Rebecca Melvin

New York, Oct. 8 – The convertibles market was quieter on Thursday as equities lagged for much of the session until the midafternoon, when they reversed course after the Federal Reserve’s September meeting minutes were released. Those minutes showed ongoing patience regarding a liftoff for interest rate increases.

Stocks gained ground in the final hour of trading with the S&P 500 stock index climbing 17.60 points, or 0.9%, on the day to 2,013.43. The index is up 4.7% since last Thursday.

The market “seems a little quiet,” a New York-based trader said of the convertibles market.

SanDisk Corp. was moving up on news that the Milpitas, Calif.-based flash memory chip maker is partnering with Hewlett-Packard Co. to collaborate on new storage solutions.

The partnership between HP’s Memristor technology expertise and SanDisk’s non-volatile ReRAM memory technology, manufacturing and design expertise will focus on developing next-generation, enterprise memory-driven computing and enhancing data centers.

The SanDisk convertibles were higher on both an outright and hedged basis.

But some names pulled back in the early going along with their underlying shares after moving higher in a broad rally earlier in the week.

Ctrip.com International Ltd. was trading down with the common shares of the Shanghai-based travel services company down 4% to $67.28.

The Ctrip 1% convertibles due 2020, or the C tranche, was down 1.8 points at 94.5, according to Trace data.

The health care or biotechnology sector, which missed out on the latest rally, remained quiet and weaker on Thursday.

“It’s finding a level,” a trader said regarding the health care sector, adding that the weakness was driven by the politics surrounding drug pricing.

“It’s a political issue. Next week we will hear from Jeb Bush, and Hillary is against the trade negotiations because drug pricing is part of it,” a trader said.

As for the convertibles health care space, the trader said, “It’s more of the same today, but it’s quiet.”

Medicines Co.’s 2.5% convertibles due 2022 traded down close to 4 points at 122.6, with shares of the Parsippany, N.J.-based health care company also down about 4%. Medicines stock has traded steadily lower since Monday.

A name that was also getting a look on Thursday but not trading was Vivus Inc. after news that Icahn Enterprises LP’s subsidiary, IEH Biopharma LLC, had successfully tendered for $170.17 million principal amount, of the 4.5% convertible senior notes due 2020, or 68% of the issue. The issue price was 68, compared to around 60 where the bonds had been before the tender.

The bonds were well out of the money, with an initial conversion price of $14.86, which compared with a share price of only $2.00 currently.

“He was looking for 51% and he got $170 million out of $230 million. I expected him to get the bonds he needed, but he got more,” the trader said.

Vivus is a Mountain View, Calif.-based pharmaceutical company focused on treatments for obesity and sexual dysfunction. It priced the upsized convertible bond issue in 2013.

“Obviously that doesn’t leave very many bonds in the hands of other people,” a New York-based sellsider said. He said the news didn’t cause any of the bonds to trade on Thursday.

SunEdison Inc. remained a focus of trade although the complex wasn’t as active as it had been earlier in the week. It had been improving in terms of pricing after bottoming out with the share price last Wednesday into Thursday.

“The stock bounced after the conference call, but it started selling off again. The stock and the bonds have sort of stabilized here a bit and selling has dissipated,” the sellsider said.

For the week, the bonds are “up small,” with the SunEdison E and F tranches called 55 with the underlying shares at $9.28.

SanDisk improves

SanDisk’s 1.5% convertibles due 2017 traded around 135.875, which was up 1.3 points, according to Trace data.

SanDisk’s 0.5% convertibles due 2020 traded at 100.75, which was up 0.6 point on the day, according to Trace.

Shares of the Milpitas, Calif.-based data storage chip maker gained $2.42, or nearly 4%, to $64.11.

That was 0.5 point better on swap for the 1.5%, 2017 bonds and about 0.125 point better for the 0.5% convertibles, a New York-based trader said.

“It looks like there was some action in SanDisk,” a second New York-based trader said.

The long-term partnership with Hewlett will focus on developing new technology in the storage class memory (SCM) category. Manufacturing and design expertise will center on creating new enterprise-wide solutions for memory-driven computing. The two companies also will partner in enhancing data center solutions with solid state drives (SSDs).

The technology is aimed at addressing massive streams of data generated by the convergence of social media, security, mobility, big data analytics, cloud and the Internet of Things.

Mentioned in this article:

Ctrip.com International Ltd. Nasdaq: CTRP

Medicines Co. Nasdaq: MDCO

SanDisk Corp. Nasdaq: SNDK

SunEdison Inc. Nasdaq: SUNE

Vivus Inc. Nasdaq: VVUS

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