SanDisk expands on swap after revenue view cut; buyers seen in NXP; Synergy exploring sale

By Rebecca Melvin

New York, March 26 – SanDisk Corp. was the name of the day in the convertibles market on Thursday, with its two sister bonds dropping sharply on an outright basis along with the underlying shares but jumping on a hedged basis after the Milpitas, Calif.-based data storage chip company cut its first-quarter and 2015 revenue outlook and withdrew other forecasts for the same time periods.

The two SanDisk bonds were said to have expanded about 2 points on swap.

“It’s all SanDisk today,” a New York-based trader said.

Several other names in the semiconductor sector, of which the convertibles space has a good number, were better on the day, including the convertibles of Microchip Technology Inc. and NXP Semiconductors NV, a trader said.

Elsewhere, Synergy Pharmaceuticals Inc.’s shares popped after a report that the New York-based biopharmaceutical company is weighing options, including a sale of itself.

A level on Synergy’s 7.5% convertible bonds due 2019 was quoted at 135.125 bid, 138.125 offered versus a share price of $4.20, but it was not heard to have traded there, according to a trader.

Synergy shares gained 29 cents, or 8%, to $4.11.

Stocks fluctuated and ended in negative territory, but well off their lows for the day. The Nasdaq composite index, which took a significant hit on Wednesday, ended down 13.16 points, or 0.3%, to 4,863.36.

The Dow Jones industrial average shed another 40.31 points, or 0.2%, to 17,678.23, after dropping 292.60 points on Wednesday, and the S&P 500 stock index shed 4.9 points, or 0.2% to 2,056.15, after dropping 30.45 points on Wednesday.

Equities have declined this week after hitting record highs earlier this month.

SanDisk expands on hedge

SanDisk’s 0.5% convertibles due 2020 fell about 7.5 points outright to 101.75 in active trade but were quoted up about 2 points on swap, a Connecticut-based trader said.

SanDisk’s 1.5% convertibles due 2017 traded actively and were last seen at 140.87, which was down 23.5 points on an outright basis but also up about 2 points on swap.

SanDisk shares fell $14.98, or 18%, to $66.20.

“That is a big move in the bonds on swap,” a New York-based trader, who was active in the name, said.

SanDisk cut the revenue outlook for the quarter ending March 29 to $1.3 billion from $1.4 billion to $1.45 billion, citing certain product qualification delays, lower-than-expected sales, lower pricing and supply constraints.

The reduction followed a SanDisk warning Jan. 22 that fourth-quarter and full-year revenue would be lower than expected amid supply constraints.

NXP, Microchip a bit better

NXP Semiconductors’ 1% convertibles were up about 0.375 point on swap, a New York-based trader said. There were outright buyers in the bond and better buyers in general, the trader said.

The Dutch semiconductor components company priced $1 billion of the notes in the fall.

NXP share were down $2.65, or 2.7%, to $97.50 on Thursday.

Microchip’s 1.625% convertibles due 2025 were down on an outright basis but a bit better on swap as well, a trader said.

Shares of the Chandler, Ariz.-based semiconductor company ended up 12 cents, or 0.3%, to $48.21 on the day.

The bonds were issued in early February.

Micron Technology Inc.’s 3% convertibles due 2043 also changed hands, trading up to 111 from 108.9 last, according to Trace data. Shares of the Boise, Idaho-based chipmaker added 9 cents, or 0.3%, to $26.66.

Synergy shares up

Synergy’s 7.5% convertibles were marked around 130.5 at the end of Thursday, which was up from 123, according to a market source. But the paper did not look to have traded, a second source said.

A higher level of 135.125 bid, 138.125 offered versus a share price of $4.20 was quoted in the early going. Shares of the New York-based biopharmaceutical company popped on a report that the company is exploring a sale of itself, a convertibles trader noted.

The report said that Synergy is considering a sale after competitor Salix Pharmaceuticals Ltd. agreed to be bought earlier this month.

Synergy's lead experimental drug, plecanatide, is undergoing development to treat irritable bowel syndrome and chronic idiopathic constipation (CIC). The company anticipates submitting an application to market the drug to treat CIC by the end of the year. In fact, the company has 2 drugs in phase 3, with data expected this year.

On March 11, the Synergy bond rallied to 119.5 bid, 122.5 offered versus a share price of $3.61 from 101.375 to 103.375 versus a share price of $3.11.

Mentioned in this article:

Microchip Technology Inc. Nasdaq: MCHP

Micron Technology Inc. NYSE: MU

NXP Semiconductors NV Nasdaq: NXPI

SanDisk Corp. Nasdaq: SNDK

Synergy Pharmaceuticals Inc. Nasdaq: SGYP

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