By Abigail W. Adams
Portland, Me., Jan. 5 – Sempra Energy’s $1.5 billion in 6% series A mandatory convertible preferred stock due 2021 hit a secondary market hungry for new paper on Friday morning.
The preferreds, which priced at par of $100, were trading at 101.5 shortly after the market open versus an underlying equity of $108.00. They were up about 50 basis points, stock adjusted, a market source said.
The convertible notes of chipmakers Intel Corp., Advanced Micro Devices Inc. and Micron Technology Inc. were active and making nominal gains as the semiconductor sector scrambled to patch the recently revealed security vulnerabilities in chips that leave billions of devices susceptible to hacking.
Gain Capital Holdings Inc.’s 5% convertible notes due 2022 saw some action during Friday’s session. While the notes dipped from their previous levels on Dec. 29, they are still up more than 25 points since the online brokerage service rolled out Bitcoin trading in the United Kingdom.
Sempra’s success
The blizzard with hurricane force winds that ripped through New York City Thursday did not stop Sempra from pricing $1.5 billion in series A mandatory convertible preferreds due 2021 after the market close. The new notes were well received in their market debut on Friday.
They were trading at 101.5 shortly after the market open Friday versus an underlying equity of $108, according to a market source. The preferreds were expected to trade up as the equity makes gains.
Sempra stock ended the day at $108.45, an increase of 0.96%.
“It was a very successful transaction,” a syndicate source said. “It was oversubscribed multiple times. We got the low end of the coupon and the high end of the premium.”
The preferreds priced Thursday on the rich end of talk with a dividend of 6% and an initial conversion premium of 22.5%.
Price talk had been for a dividend of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%, according to market sources.
There was heavy fundamental allocation for the deal, which was offered concurrently with a $2.5 billion equity offering, the source said.
The preferreds were designed to appeal primarily to the outright community, such as Sempra’s existing shareholders and mutual funds.
While some technical hedge funds may become involved, the mandatory convertible preferreds “are generally not the most interesting product for them,” the source said.
The high yield on Sempra’s common stock, which is about 3%, would make short selling difficult, a market source said.
Intel’s not quite meltdown
Intel’s 3.25% convertible notes due 2039 made nominal gains during Friday’s session after dropping Wednesday as news broke that its processing systems dating back to 1995 were affected by security vulnerabilities dubbed Meltdown and Spectre.
The notes were trading in the 214 to 216 range during Friday’s session after firming from around 212 since word about the chip flaw went viral. Intel’s stock was also up, ending Friday’s session at $44.74, an increase of 0.7%.
The notes were in the 224 range prior to news of the security vulnerability.
While the chip flaws have been called “Intel’s PR nightmare” in the media, the company is a credit powerhouse, a market source said, and will continue to be an attractive investment.
AMD’s 2.125% convertible notes due 2026 continued to make gains during Friday’s session, despite its processing units also being affected by the security vulnerability Spectre, which is harder to exploit than the Intel chip-specific vulnerability Meltdown.
The notes reached a high of 171 before ending the day at 168.265, according to Trace data. AMD stock was down at the market close Friday to $11.88, a decrease of 1.98%.
Micron’s 3% convertible notes due 2043 saw another day of active trading during Friday’s session. The notes were trading in a range of 157.297 to 161.612 before ending the day at 161.248, according to Trace data.
Micron stock was down at the market close Friday at $45.80, a decrease of 2.3%. Micron’s 3% convertible notes have made steady gains since news about the security vulnerabilities broke. The notes were trading in the 148 to 150 range on Tuesday.
The Boise, Idaho-based semiconductor company that specializes in memory chips is a sometimes partner, sometimes competitor of Intel. The semiconductor sector is working to develop a fix to Meltdown and Spectre, which are believed to affect billions of devices.
Gain soars on Bitcoin
Gain’s 5% convertible notes due 2022 have received increased attention since the online brokerage company specializing in foreign exchanges rolled out Bitcoin trading to its customers in the United Kingdom.
The 5% notes ended Friday’s session at 136.154, according to Trace data. Gain’s stock ended Friday at $9.78, an increase of 0.62%. While the 5% notes saw a decrease from its trading prices on Dec. 29, when its foray into Bitcoin trading was announced, the notes are still 25 points above their previous levels.
The notes soared into the 140s on Dec. 29, the last trading day of 2017. The notes have seen little trading activity since they were issued in August.
The highest trading price the 5% notes reached prior to the Bitcoin announcement was 111 in October. However, they have been in the 101 to 102 range for much of their existence, according to Trace data.
Mentioned in this article:
| Sempra Energy: | NYSE: SRE
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| Intel Corp.: | Nasdaq: INTC
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| Advanced Micro Devices Inc.: | Nasdaq: AMD
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| Micron Technology Inc.: | Nasdaq: MU
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| Gain Capital Holdings Inc.: | NYSE: GCAP
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