Spirit Realty gains in active trade as S&P, Fitch assign investment-grade ratings; NXP up

By Rebecca Melvin

New York, April 26 – Convertibles players continued to respond to issuers’ quarterly earnings news and other news on Tuesday, but the biggest market focus by far was again Spirit Realty Capital Inc. Spirit’s two convertibles were higher in heavy volume as investment-grade ratings were assigned to the convertibles of the Scottsdale, Ariz.-based real estate investment trust.

Standard & Poor’s said it assigned a BBB- issue-level rating to the two Spirit convertibles tranches, which mature in 2019 and 2021. The convertibles rating followed on S&P’s BBB- corporate credit rating and stable outlook assigned on Friday.

In addition, Fitch Ratings assigned Spirit Realty an issuer default rating of BBB- with a stable outlook.

Elsewhere, the convertibles of NXP Semiconductors NV traded up after the Netherlands-based semiconductor company posted earnings that beat estimates and revenue that was in line with guidance. Looking ahead, NXP guided current quarter earnings and revenue in line with expectations.

NXP’s 1% convertibles due 2019 jumped more than 2 points to about 115 with the underlying shares closing up $3.35, or 4%, to $86.69.

Fellow chip maker Micron Technology Inc. was also in trade. But the Micron 3% convertibles due 2043 rose just 0.6 point to 67.66 amid a 9% surge in the underlying shares to $11.51.

Twitter Inc.’s 1% convertibles due 2021 traded around 85, which was steady on previous levels, with shares little changed on Tuesday. But Twitter shares plunged in after-hours action after the San Francisco-based social media company posted disappointing results.

Twitter’s 0.25% convertibles due 2019 traded little changed to slightly lower during the session at 87.25.

Molina Healthcare Inc.’s 1.625% convertibles due 2044 took another leg higher. The bond changed hands last at 129.6 Tuesday, which is up from 122.5 on Friday.

Molina shares closed up $2.24, or 3.4%, to $67.72. The shares have been running higher since Thursday.

Spirit Reality extends gains

Spirit Realty’s two convertibles extended gains on Tuesday as market players continue to eye the company’s new and desirable investment-grade ratings.

S&P assigned a BBB- issue-level rating to the approximately $850 million of convertible notes and left its BBB- corporate credit rating and stable outlook unchanged.

S&P said the ratings reflect the company’s satisfactory business risk profile and intermediate financial risk profile. The stable outlook reflects a view that the company’s same-store portfolio will perform steadily and that it will continue to fund its fairly aggressive appetite for investment growth primarily with equity and asset sales, the agency said.

On Friday, S&P upgraded its corporate credit rating on Spirit Realty to BBB- from BB+, saying the upgrade primarily reflected the REIT’s recently upsized equity issuance, which resulted in net proceeds of $369 million.

On Monday, Fitch Ratings said it assigned Spirit an issuer default rating of BBB- and a stable outlook, reflecting Spirit Realty’s solid credit metrics, strong management team, differentiated investment strategy and diversified portfolio.

Fitch also said these strengths are balanced by unproven access to non-bank/nonconvertible unsecured debt capital and the implications of the master trust debt facility.

Fitch also said the principal considerations are that a significant percentage of Spirit Realty’s NOI is collateralized by the Trust facility, providing incentive for Spirit Realty to support it more so than traditional single asset mortgages.

But if Spirit unwinds the structure as the notes issued through it are either prepaid or mature, there are structural elements that will result in the structure becoming over-collateralized and thereby weakening unencumbered asset coverage until the final dollar of trust debt is repaid, Fitch said.

Spirit Realty’s 3.75% convertibles due 2020 traded up to 107 in the early going, which was up from about 105 late Monday, according to Trace data. And that is up from about 101 to 102 ahead of the news on Friday.

Spirit Realty’s 2.875% convertible due 2019 moved up to 104.20 from about 103 on Monday, according to Trace data.

Spirit shares closed down 0.2% to $11.22.

Mentioned in this article:

Micron Technology Inc. NYSE: MU

Molina Healthcare Inc. NYSE: MOH

NXP Semiconductors NV Nasdaq: NXPI

Spirit Realty Corp. NYSE: SRC

Twitter Inc. Nasdaq: TWTR

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.