Convertibles start week on quiet note; SolarCity in line; Covanta firm; Finisar, Post on tap

By Rebecca Melvin

New York, Dec. 9 -The convertible bond market got off to a rather quiet start on Monday, leaving traders wondering if they would get in one more week of decent activity before the year-end slowdown begins.

"It feels like the holiday got started early," a New York-based trader said.

Weather may have been a contributing factor to the quiet tone as freezing rain in the New York-area snarled the early commute -keeping some market players away from their desks. But it was more likely that trading was subdued because there were no new issues and not much by way of news flow to spur the market on Monday, a New York-based sellsider said.

After the market close, Finisar Corp. launched an offering of $200 million of 20-year convertible senior notes, and Post Holdings Inc. launched an offering of $300 million of perpetual convertible preferred shares that were seen pricing after the market close on Tuesday.

Back in established issues, a few names were trading relatively actively, sources said.

SolarCity Corp.'s 2.75% convertibles traded down in line with the San Mateo, Calif.-based distributed energy provider's lower shares.

Nvidia Corp.'s 1% convertibles due 2018 retraced a 10 cent to 15 cent slip to perform slightly better on the day at 100.20 bid, 100.40 offered with shares of the Santa Clara, Calif.-based graphics processor company ending lower by nearly 2%.

Covanta Holding Corp. was also a notable trader with those convertibles described as "firm" by a trader of the name on Monday.

The Covanta bonds expanded on a dollar-neutral basis by about 0.25 point, with shares of the Fairfield, N.J.-based waste disposal and renewable energy company higher by 1%.

Equity markets were slightly higher on Monday, leaving the S&P 500 stock index at a record high even though the index tacked on only a scant 3.28 points, or 0.2%, to 1,808.37. The Dow Jones industrial average ended better by 5.33 points, or 0.03%, at 16,025.53, and the Nasdaq stock market added 6.23 points, or 0.2%, to 4,068.75.

On Friday, a better-than-expected jobs report boosted the S&P stock index by 1.1% with the Dow adding 1.3% and the Nasdaq up 0.7%.

SolarCity 'treading water'

SolarCity's 2.75% convertibles were seen at 113 bid, 114 offered versus a share price of $51.50, which was down in line with the underlying shares, or flat on a dollar-neutral, or hedged, basis, a trader said.

SolarCity shares fell $1.89, or 3.5%, to $51.83 on the day. The dip put shares about where they were before Thursday's surge on news that the company is teaming up with Tesla Motors to use Tesla batteries to potentially store solar-generated power.

A trader said the bonds traded fairly actively and were in line, or "treading water," with the underlying shares.

Nvidia flat to higher

Nvidia's 1% convertibles due 2018 were quoted at 100.20 bid, 100.40 offered late Monday.

"Nvidia is up a little on the day. It's up 10 cents to 15 cents," a New York-based trader said.

Meanwhile, Nvidia shares slipped about 25 cents, or 1.7%, to $15.20.

The Sunnyvale, Calif.-based internet search, content and communications company priced an upsized $1.25 billion of the five-year notes at the rich end of talked terms about two weeks ago.

Covanta adds dollar neutral

"Covanta's 3.25% convertibles due June 1, 2014 moved up to 113.875 bid, 114.625 offered on Monday from about 112, according to Trace data.

Shares of the Fairfield, N.J.-waste management and energy company rose 19 cents, or 1.1%, to $17.44 on Monday.

"The Covantas traded some. They are firm, and traded up a bit on a dollar-neutral basis amid hedge fund buying," a trader said.

The bonds weren't trading in line with the underlying shares, the trader said. "They are cheap bonds that richened up slightly," the trader said, adding that they gained about 0.25 point.

Finisar to price

Finisar, a Sunnyvale, Calif.-based maker of fiber optic subsystems, plans to price $200 million of convertible senior notes due 2033 to private investors under Rule 144A, according to a news release.

The offering has a $30 million greenshoe.

The bonds have contingent conversion and net share settlement.

The bonds will be callable at dates to be determined, and holders will have the right to put the bonds on certain dates. There is also a change-of-control put.

Proceeds will be used for general corporate purposes, including working capital, and a portion of the proceeds may be used to acquire complementary businesses, products or technologies, although Finisar has no present commitments with respect to any such acquisitions.

Post to price

St. Louis-based cereal maker Post plans to price $300 million of perpetual convertible preferred shares that were talked to yield 2% to 2.5% with an initial conversion premium of 10%.

The Rule 144A offering of series C preferreds has a $45 million greenshoe and was being sold via Credit Suisse Securities (USA) LLC, Barclays, Goldman Sachs & Co. and Wells Fargo Securities LLC.

Proceeds will be used for general corporate purposes, which may include pending or future acquisitions, working capital and capital expenditures.

Mentioned in this article:

Covanta Holding Corp. NYSE: CVA

Finisar Corp. Nasdaq: FNSR

Nvidia Corp. Nasdaq: NVDA

Post Holdings Inc. Nasdaq: POST

SolarCity Corp. Nasdaq: SCTY

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