SunEdison near lows; Nvidia flat; International Consolidated Airlines sells €1 billion

By Rebecca Melvin

New York, Nov. 12 – U.S. convertibles were mostly weaker again on Thursday, with SunEdison Inc. remaining a drag in the space, while much of the action centered on the market’s bigger, liquid names. The broader markets saw weaker equities and lower oil prices on the day after Veterans Day.

“There were no real significant credit events,” a New York-based trader said of the session, and most of the action was in “on-the-run, cash names,” in which the big dealers hold inventories.

“There were no real stories, and I’m not really sure what the catalysts were,” he said.

The convertibles market was also weaker on Wednesday when the bond markets were closed, but equity markets were open.

Both SunEdison’s 0.25% convertibles due 2020, which is a $600 million issue that priced in June 2014, and SunEdison’s 2.375% convertibles due 2022, a $460 million issue that priced in January 2015, traded at 41.5 on Thursday. That was more than a point lower on the day for the 0.25% convertibles and about flat for the 2.375% paper, according to Trace data.

SunEdison’s stock bounced intraday from a low of $4.06, up to $5.05, but the strength was only temporary and shares dropped back for a 7.4% lower close to $4.54. On Tuesday and Wednesday, the shares fell 22% and 15%, respectively.

Aceto Corp.’s new 2% convertibles, which debuted in the market on Wednesday, slipped to 98.8 with lower shares for the Port Washington, N.Y.-based pharmaceutical ingredients company.

Nvidia Corp.’s 1% convertibles were steady in active trade. There may have been some sellers in the name after a large run up in the stock last month, but pricing was little changed on Thursday.

PDC Energy Inc.’s 3.25% convertibles due in May 2016, which is a small, rather illiquid issue, traded at 140 along with a 5% drop in the underlying shares of the Denver-based oil and natural gas company. Last week the company reported a disappointing third-quarter loss of $41.5 million.

In the primary market, Britain’s International Consolidated Airlines Group SA launched and priced €1 billion of convertible bonds overseas, at the rich end of talked terms. The Regulation S deal came in two tranches for €500 million of 0.25% five-year convertible bonds and €500 million of 0.625% seven-year convertible bonds. Both priced with an initial conversion premiums of 62.5%.

London-based International Consolidated Airlines is the holding company of British Airways, Iberia and Vueling, and proceeds of the deal are being used to repay a bridge loan to finance its acquisition of Aer Lingus Group plc.

SunEdison languishes

SunEdison’s 2.625% convertibles due 2023, or the E tranche, a $450 million issue that priced in May 2015, traded at 35.75, which is down from 43 on Tuesday when the company reported earnings, and down from the mid-50s previously.

SunEdison is known in the convertibles market as a “serial issuer,” and the company has about $3.8 billion outstanding in convertibles in seven different issues, out of about $11.7 billion of total debt.

The company’s securities have slid drastically since peaks hit in July.

On Thursday, the stock closed at $4.54. But it had a “huge rebound” intraday that didn’t gain any traction.

Also on Thursday, Axiom Capital, a small broker, downgraded its rating on the shares to “sell” from “hold” and cut its price target on the shares to $2.00 per share. Axiom analyst Gordon Johnson said the cut was late in coming because management had indicated that it was going to be able to sell projects at high margins, but these sales have not materialized.

On Tuesday, the solar technology company, based in St. Peters, Mo., reported a wider-than-expected loss for its third quarter and unveiled some of the large expenses facing the debt-strapped company.

Nvidia steady in active trade

Nvidia’s 1% convertibles due 2018 traded at 155.8 on Thursday, which was steady on the day following a 4-plus point drop on Tuesday.

Nvidia shares were also little changed.

“The bonds trade at 3.5 points over parity, so it is not a very exciting name, and it doesn’t move on a dollar-neutral basis,” a trader said.

There didn’t appear to be any company news that would have spurred trading action.

“The stock was up 50% in October, so there may be outrights selling and taking profits. It is definitely active,” the trader said.

Mentioned in this article:

Aceto Corp. Nasdaq: ACET

International Consolidated Airlines Group SA London: IAG

Nvidia Corp. Nasdaq: NVDA

PDC Energy Inc. Nasdaq: PDCE

SunEdison Inc. Nasdaq: SUNE

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