Convertibles better as March gets underway; Seacor up; Exelixis expands; SunEdison swamped

By Rebecca Melvin

New York, March 1 – U.S. convertibles were generally better on Tuesday as the market followed an improved high-yield market and rally in equities to start off the new month.

There was trouble with one issuer in particular, however, namely SunEdison Inc., which has become something of a scourge for the convertibles space, and which dropped after the company said it is delaying filing its annual report as an internal investigation into its finances continues.

Overall, convertibles were “much better to buy,” a New York-based trader said, referring to a healthy bid in the market amid a somewhat nebulous offer side.

Energy convertibles were up by about 0.5 point on average, the trader said.

Oil prices surged, ending up about 1.5% on the day, and equity indices saw 2% gains in the S&P 500 stock index and Dow Jones industrial average and a nearly 3% climb in the Nasdaq stock market.

Seacor Holdings Inc. was “in vogue” after the Fort Lauderdale, Fla.-based offshore oil, gas and marine equipment company bought back bonds, a trader said.

Exelixis Inc.’s convertibles popped on an outright basis and improved a couple of points on a swap basis early Tuesday after the South San Francisco, Calif.-based biotechnology company signed an exclusive licensing agreement to commercialize and develop cancer therapy Cabozantinib in regions outside the United States, Canada and Japan, a New York-based trader said.

In lighter action, Workday Inc.’s convertibles were higher after the Pleasanton, Calif.-based cloud-based computing company reported a quarterly loss that beat estimates on higher revenue that came in higher than expected. Workday also guided expectations for current quarter revenue downward and annual revenue at the top end of expectations.

The 0.5% convertibles of fellow cloud enterprise software maker LinkedIn Corp. edged up to 90.5 from about 89.75.

In early February, the overall technology software sector took a hit after LinkedIn posted weak earnings and suggested that there may be lower corporate IT spending this year due to macro concerns.

Seacor gains

Seacor’s 2.5% convertibles due 2027 were up a couple of points to 86.5 bid, 87.5 offered as Seacor shares ended little changed at $48.50.

“They are still really cheap,” a trader said of the bonds.

In results posted on Monday, Seacor said it bought back $65.5 million in principal amount of its 2.5% convertible senior notes for $62.6 million, resulting in gains on debt extinguishment of $1.1 million, and $15.1 million in principal amount of its 7.375% senior straight notes for $14.6 million, resulting in gains on debt extinguishment of $0.3 million.

Seacor also swung to a loss for its fourth-quarter, reporting a loss of $56.9 million, or $3.36 per share, on revenue of $250.6 million.

Adjusted earnings were 26 cents per share. The company also reported a full-year loss of $68.8 million, or $3.94 per share, on revenue of $1.05 billion.

Exelixis expands 2 points

Exelixis’ 4.25% convertibles due 2019 traded up to 98.75 last from about 92.75 previously. The jump equated to an expansion of a couple of points on swap, the trader said.

Exelixis’ underlying shares ended up 19 cents, or 5%, at $3.83.

The Exelixis convertibles were trading actively on the news.

Exelixis also reported a narrowed quarterly loss on higher-than-expected revenue. Exelixis also reported a narrowed loss for the year, or a loss of $169.7 million, or 81 cents per share, for 2015, compared to a loss of $268.5 million, or a loss of $1.38 per share, in 2014.

Workday in line

Workday’s 0.75% convertibles due 2018 changed hands last at 110.5, which was up from 103 last on Friday, according to Trace data.

Workday’s 1.5% convertibles due 2020 traded up to 112.56 from 106.5 on Monday and 105.125 on Friday.

Workday shares surged to $71.74, which was up $11.29, or 18.7%, extending an early 8.5% gain.

For the just completed quarter, the company lost $73.4 million, or 42 cents a share, compared with a loss of $50.4 million, or 32 cents a share, in the year-earlier period.

Excluding items, the loss was of $800,000, or a penny a share, which was narrower compared to $8.6 million, or a loss of 6 cents a share, a year earlier. Analysts had been expecting an adjusted loss of 5 cents a share.

Revenue rose 43% to $323.4 million, which was better than the company’s estimate of $317 million to $320 million in revenue. Analysts were expecting $320 million.

Looking ahead, Workday’s revenue guidance for the current quarter is between $337 million and $339 million, which is less than the $343 million analysts were expecting. The company also forecast annual revenue of $1.54 billion to $1.55 billion, which was in line with expectations for $1.55 billion.

SunEdison drops again

SunEdison’s 2.375% convertibles were indicated down to 10.5 from 13.3, according to a market source.

SunEdison shares fell 48 cents, or 24%, to $1.50.

SunEdison said in a filing that an investigation that was begun last year is based on allegations by former executives concerning SunEdison’s anticipated financial position disclosed to the board.

SunEdison said in a filing that no wrongdoing has been found so far.

One of SunEdison’s yieldcos, TerraForm Power Inc., is also delaying its annual report.

Meanwhile there were headlines related to David Tepper’s Appaloosa Management LP suit against SunEdison to block its proposed $1.9 billion acquisition of Vivint Solar Inc. Tepper, an investor in TerraForm, has requested an expedited trial, which the court said Tepper was entitled to do after Appaloosa’s request for an injunction was denied last week.

Mentioned in this article:

Exelixis Inc. Nasdaq: EXEL

LinkedIn. Corp. Nasdaq: LNKD

Seacor Holdings Inc. NYSE: CKH

SunEdison Inc. Nasdaq: SUNE

Workday Inc. Nasdaq: WDAY

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