SanDisk trades ahead of anticipated deal; NuVasive extends gains after strong debut

By Rebecca Melvin

New York, March 14 – The U.S. convertibles market died back after a burst of activity last week when new issuance and higher equity and oil prices sparked activity.

Especially compared to how it went out on Friday, it was a pretty slow day, a New York-based trader said. Equity trading volume levels were lower as well.

Last week, all boats seemed to lift after the European Central Bank announced it was implementing a new, unexpectedly robust round of stimulus measures, including lower interest rates and an expansion of its asset-purchase program. This week, Monday was quiet ahead of meetings of the Federal Reserve, the Bank of England and the Bank of Japan, among others.

Among Monday’s most active issues was the SanDisk Corp. 0.5% convertibles due 2020, which were steady right around the 104 mark, as market players anticipate a deal with Western Digital to be completed soon, a trader said.

The new NuVasive Inc. deal, which dominated trade on Friday, extended gains on Monday, while the older NuVasive bond, much of which is being repurchased by the company with proceeds of a new deal, was a little stronger, trading at 123 early Monday, up from 122.5 on Friday.

Despite lower oil prices, energy was flattish and not actively traded. Cobalt International Energy Inc.’s 3.125% convertibles remained unchanged at 45, and the Cobalt 2.625% convertibles were little changed at 43, despite lower shares. Cobalt shares closed down 2.8%.

Chesapeake Energy Corp. shares were also lower, but Chesapeake convertibles were actually a little higher. The Chesapeake 2.5% convertibles closed up at 67.5, which was from 66 on Friday, according to Trace data.

Oil prices fell about 3% on Monday after rising 7% last week. West Texas intermediate crude for April delivery slipped $1.13, or 3%, to $37.37.

Elsewhere, Starwood Property Trust Inc.’s 4% convertibles due 2019 gained about a point outright to trade at 99.25 in the early going as shares of the Greenwich, Conn.-based commercial mortgage company remained flat to slightly lower.

Colony Financial Inc.’s 5% convertibles due 2023 were also higher, trading at 89.35, according to Trace data, which was up from 86.5 to 88.5 in trading action last week. Shares of Colony, a Santa Ana, Calif.-based real estate investment and financial company, were down in the early going.

Overall, there were no dominant trends, and most things traded “one-off,” the New York-based trader said of Monday’s convertibles session.

Newer NuVasive extends gains

NuVasive’s 2.25% convertibles due 2021 finished the session at 105.375, a trader said, with the underlying shares of the San Diego-based medical device maker down 36 cents, or 0.8%, to $46.70.

The $550 million bond issue, which debuted in the market on Friday, had closed at 104.25 at the end of that session versus shares that were up 4% to $47.06.

The older NuVasive 2.75% convertibles traded up to 123 from about 122.5 on Friday and 121.5 on Thursday.

Proceeds of the new bond are being used to repurchase more than half of the old issue, which matures in 2017.

The new bonds were the most active name of the day on Friday, with more than $150 million of them changing hands.

San Diego-based NuVasive is a medical device company focused on developing products for minimally disruptive surgical treatments for the spine.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Cobalt International Energy Ltd. NYSE: CIE

Colony Financial Inc. Nasdaq: CLNY

NuVasive Inc. Nasdaq: NUVA

SanDisk Corp. Nasdaq: SNDK

Starwood Property Trust Inc. Nasdaq: STWD

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