Convertibles quiet again; Starwood Property comes in; Inotek sells $20 million convertible

By Rebecca Melvin

New York, Feb. 18 – Convertibles were trading quietly on Wednesday amid a general absence of catalysts and as equities put in a weak session, market sources said.

The convertible market also put in a quiet day on Tuesday following the three-day holiday weekend in observance of Presidents Day.

Equities pared losses into the close Wednesday with the Nasdaq stock market pushing into positive territory after the Federal Reserve released minutes from its last policy meeting. The minutes showed that Fed officials discussed the pros and cons of leaving rates lower for longer versus moving quickly on rate hikes.

Earlier in the session, weaker-than-expected economic reports doused investor enthusiasm. The U.S. Producer Price Index, which measures prices at the wholesale, or producer level, was down 0.8% in January, which was greater than the 0.4% estimate.

Among convertibles in trade, Starwood Property Trust, Inc.’s convertibles contracted slightly on a dollar-neutral, or hedged, basis in fairly active trade, a New York-based sellsider said. Shares of the Greenwich, Conn.-based commercial and real estate finance company remained essentially unchanged.

Yandex NV’s 1.125% convertibles due 2018 were quoted at 81.625 bid, 81.75 offered, while shares were up $1.19, or 7%, at $17.84 following quarterly results reported by the search engine serving Russia. The results were in line with expectations.

Yandex shares subsequently pulled back for only a 1.2% gain on the day.

In the primary market, Inotek Pharmaceuticals Corp., which has been on the forward calendar for some time, priced its initial public offering of stock at $6.00 per share on Wednesday and also raised $20 million in 5% five-year convertibles with an initial conversion premium of 5%.

The Inotek shares tacked on 1% intraday but ended unchanged at $6.00, which was their offer price. The convertible bonds were not seen to have traded, a syndicate source said at the end of the day.

“It was a good deal with the bond coming concurrently with the IPO,” the syndicate source said. “And hopefully it will encourage other companies to follow suit when they do IPOs.”

Starwood contracts slightly

Starwood’s 3.75% convertibles were seen at 104.25 at the end of the session.

The Starwood 4% convertibles were at 114.25.

Starwood shares ended up 4 cents, or 0.2%, at $24.34 on Wednesday.

“We traded a lot of Starwood. They look like they came in about 0.25 point,” a sellsider said.

Mentioned in this article:

Inotek Pharmaceuticals Corp. Nasdaq: ITEK

Starwood Property Trust Inc. Nasdaq: STWD

Yandex NV Nasdaq: YNDX

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