FireEye deals add in active trade; Intel better bid on M&A news; SINA up about 0.75 point

By Rebecca Melvin

New York, June 1 – U.S. convertibles were trading quietly Monday with activity concentrated mainly in recent new issues, market sources said.

FireEye Inc.’s two $460 million deals, which debuted in the market last Thursday, edged up in active trade, along with a shares of the Milpitas, Calif.-based network security company, which were up about 1%.

“They are still better to buy,’ a New York-based trader said.

Interactive Intelligence Group Inc.’s $150 million of 1.25% convertibles, which priced a week and a half ago, were under pressure, changing hands at 96, which was down about 0.9 point on the day, according to Trace data. Interactive Intelligence shares were flat to lower at about $43.00.

Atlas Air Worldwide Holdings Inc.’s 2.25% convertibles, which debuted in the market on Friday, were not heard in trade on Monday, although shares rose nearly 2%. The bonds traded poorly on Friday, slipping below par.

One trader observed that a problem with the Atlas Air deal was its sector. The Purchase, N.Y.-based company is in outsourced aircraft and aviation services.

“People have been burned in this sector before, so that’s why it didn’t trade well,” the trader said.

Back in established issues, Intel Corp.’s 2.95% convertibles were bid better on Monday after the Santa Clara, Calif.-based chip maker said that it has offered to buy Altera Corp. for $54.00 per share, or about $16.7 billion, which represented a 10.5% premium to the closing share price of the San Jose, Calif.-based chip company’s shares on Friday.

Meanwhile, SINA Corp.’s 1% convertibles due 2018 were up about 0.75 point but underperforming shares that were up about $8.00 during morning trade. Activity was light, however, with more inquiries than trades, a New York-based trader said.

Molycorp Inc.’s convertibles were mostly quiet, but the 6% convertibles were seen to have traded at 3 on Monday after the Greenwood Village, Colo.-based rare earths producer announced it will skip a $32.5 million coupon payment, triggering the 30-day grace period and possible bankruptcy filing.

Overall the market was muted for the first trading day of the month, sources said.

“I think guys are still doing month end and closing up May,” a New York-based trader said.

He said that hedged players did OK for May and were probably up about 0.25 basis points to 0.5 bps for the month.

FireEye still trading well

Both the FireEye 1.625% and 1% convertibles due 2035 were up about a point outright to 106 with the underlying share price at $47.10.

They were said to have expanded slightly again on Monday.

“They are going into the [UBS] index, and that is why they remain better bid even at these expanded levels,” a New York-based trader said.

The two bonds trade at pretty close to the same level even though that for all intents and purposes, the 1% bonds are five-year notes and the 1.625% convertibles are longer-dated seven-year notes.

The A notes also have puts in years five, 10 and 15. The B notes are non-callable for five years and then provisionally callable for two years if shares exceed 130% of the conversion price.

On initial trading Thursday, the two tranches traded up to about 105, and on Friday the bonds were little changed.

Intel better with M&A

Intel’s 2.95% convertibles due 2035 traded at 127.67, which was down nearly 1 point on an outright basis, according to Trace data. But on a dollar-neutral, or swap, basis the bonds were better.

“The Intel 2.95% convertibles were better the last couple of days. I think outrights are coming in with the Altera news, and the bonds were a little better today and Friday,” a New York-based trader said.

The Intel 3.25% convertible due 2039 were not heard in trade.

The Altera deal is Intel’s largest since its McAffee acquisition for $7.7 billion in 2011.

Altera is a maker of programmable chips.

SINA underperforms shares

SINA’s 1% convertibles due 2018 traded up by about 0.75 point to 94.625 early Monday as shares of the Shanghai-based social media company surged 21% to $49.44.

The far out-of-the-money SINA bonds were not expected to have moved in lock step with the equity.

SINA announced a subscription agreement with chairman and chief executive officer Charles Chao for the issuance and sale of 11 million new ordinary shares for $456 million in cash. Mr. Chao’s per share purchase price was $41.49, representing the average closing trading price for the 30 days ended May 29.

The name traded “a little bit” with more questions than trades, a New York-based trader said.

“The stock is outperforming, but that’s not surprising,” the trader said.

Shares of the Shanghai-based social media company ended up $9.48, or 23%, to $50.21.

Molycorp bumps on bottom

Molycorp’s 6% convertibles due 2017 traded at 3 on Monday, which was unchanged from Friday but down from about 7 earlier last week. The bonds were not trading actively.

Molycorp shares skidded 10 cents, or 20%, to $0.43 on Tuesday.

The company has struggled since China eased export restrictions in late 2011. It has posted three straight years of quarterly losses. It has $1.7 billion in debt.

In January the company was given notice by the New York Stock Exchange that it had six months to get its 30-day average share price above $1.00 or face delisting.

Mentioned in this article:

Atlas Air Worldwide Holdings Inc. Nasdaq: AAWW

Intel Corp. Nasdaq: INTC

Interactive Intelligence Group Inc. Nasdaq: ININ

Molycorp Inc. NYSE: MCP

FireEye Inc. Nasdaq: FEYE

SINA Corp. Nasdaq: SINA

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