Light volume mutes trends; Micron, Chesapeake trade weakly; PTC pops; SunEdison launches convert

By Rebecca Melvin

New York, Aug. 17 – Light trading volume masked trends in U.S. convertibles on Monday, market players said.

In the broader markets, equities and Treasuries edged higher, crude oil prices slipped further and CBOE volatility rose. But in convertibles, “not much really traded,”’ a New York-based trader said. “With less than $300 million on the tape it is so hard to gauge weakness.”

The trader was referring to Finra’s Trace volume data.

According to that data, Micron Technology Inc.’s 3% convertible was the most actively traded bond for the session, and that paper looked to have underperformed the common shares of the Boise, Idaho-based semiconductor company.

The Micron bond prices were weak in the early going. But later trades rose and looked about flat compared to Friday. He stock ended 1.6% higher after mixed analysts’ ratings actions.

Chesapeake Energy Corp.’s convertibles also appeared to underperform the shares. The Chesapeake 2.5% convertibles due 2037 (Cusip 165167BZ9) traded at 87.3, and then lower at 85, which was down from 88.25 to 88.5 on Friday. Shares of the Oklahoma City-based energy company added 8 cents, or 1%, to $7.57 on the day.

Elsewhere in the oil and gas sector, Emerald Oil Inc. was offered at 35, with no bid, a New York-based trader said. Emerald Oil shares slid 14 cents, or more than 6%, at $2.10.

Energy XXI (Bermuda) Ltd. was quiet, with shares of the Houston-based oil and gas company down 3 cents, or nearly 2%, at $1.70.

PTC Therapeutics Inc.’s 3% convertibles due 2022, which priced early last week, popped along with the underlying shares of the South Plainfield, N.J.-based pharmaceutical company, which jumped 10%.

The PTC Therapeutics 3% convertibles added almost 5 points to 103.75.

After showing up in trade almost every day last week, SunEdison Inc. managed to feature in the convertibles market at the start of this week again by launching a $500 million deal of perpetual convertible preferreds after the close.

The offering was being priced on an overnight basis, and represents the second time this year that the St. Peters, Mo.-based solar technology company has tapped the convert market: in May it priced dual tranches of convertible bonds for $900 million in proceeds.

Those SunEdison bonds traded weakly, if little changed on an outright basis on Monday. The SunEdison 2.625% convertibles due 2023 were seen changing hands at 69.19 and the SunEdison 3.375% convertibles due 2025 traded at 69.35, which was down 0.3 point from the previous level, according to Trace data.

SunEdison shares ended the regular session on Monday at $14.68, which was up 54 cents, or 3.8%. In after- hours action, the shares slipped 34 cents, or 2.3%, to $14.34.

Micron trades at 90

Micron’s 3% convertibles due 2043 were seen late in the session around 90, which was little changed from its most recent level. Earlier the bonds had traded in the 88 to 89 range.

Micron was the most actively traded bond of the day following news of a few upgrades and downgrades to the stock, a trader said.

Wedbush Securities downgraded its rating for the chipmaker to “neutral” from “outperform,” citing the unlikelihood that supply and demand will improve for DRAM memory and that cost cuts won’t outpace selling prices until mid-2016.

Wedbush also lowered its price target for the company’s shares to $19 per share from $26 per share.

Wells Fargo, on the other hand, upgraded Micron to “market perform” from “underperform,” and lowered its price target on the common stock to between $16 and $19 per share, from a range of $17 to $20.

The firm’s analysts said that the stock is now trading within its valuation range.

The Micron notes have been active on the heels of rumors that the company is getting a takeout offer from China’s Tsinghua Unigroup chip maker

SunEdison launches another deal

SunEdison, the solar technology company launched an offering of $500 million of perpetual preferred stock after the market close on Monday that was talked to yield 6.75% to 7.25% and with an initial conversion premium of 15% to 20%.

The preferreds are non-callable for five years, and then provisionally callable if shares exceed 130% of the conversion price.

Proceeds are earmarked for general corporate purposes including funding working capital and growth initiatives.

Joint bookrunners are Goldman Sachs & Co., BofA Merrill Lynch, Morgan Stanley & Co. LLC, Deutsche Bank Securities Inc., Macquarie Capital and J.P. Morgan Securities LLC.

“At this point the plan is to price before the market open,” a syndicate source said.

Mentioned in this article:

Emerald Oil Inc. NYSE: EOX

Energy XXI (Bermuda) Ltd. Nasdaq: EXXI

Chesapeake Energy Corp. NYSE: CHK

Micron Technology Inc. NYSE: MU

PTC Therapeutics Inc. Nasdaq: PTCT

SunEdison Inc. Nasdaq: SUNE

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