Vipshop trades up in line with shares after earnings; Liberty Interactive/Charter to price

By Rebecca Melvin

New York, Aug. 16 – Market activity in U.S. convertibles was generally light and typical of a mid-summer, August day, but there were a few things trading actively and in line with moves of the common shares underlying the bonds, a New York-based trader said.

Vipshop Holdings Ltd.’s 1.5% convertible, which is part of the China internet sector that is not everyone’s cup of tea, was the top volume name in trade, according to Trace data, and those bonds were said to have moved up in line with the initial move in the underlying American Depositary Shares, which means the bonds were unchanged on a dollar-neutral, or swap, basis compared to Monday. The move was spurred by the Guangzhou, China-based online discount retailer’s better-than-expected quarterly earnings report.

The Vipshop bonds were trading around 108.5 to 109.5, which was up on an outright basis from around 107.5 on Monday.

Higher sales pushed Vipshop revenue up 49% year over year, and that propelled better earnings.

DISH Network Corp.’s recently priced $3 billion convertible continued to trade and promises to be a mainstay of the secondary market for some time. The DISH bonds were also said to have moved in line with the common shares of DISH.

After the market close, Liberty Interactive LLC, a subsidiary of Liberty Media Corp., launched a deal to sell senior debentures exchangeable for Charter Communications Inc. common stock in a private offering, according to a company news release. Price talk and timing was not immediately available.

On Friday, Liberty Media’s new notes exchangeable for common shares of Time Warner Inc. debuted in the market, and the upsized $444.6 million of 2.25% paper traded up to about 101.25 bid, 101.5 offered.

Back in established issues, Liberty Media’s old 3.5% notes exchangeable into the common shares of Motorola Solutions Inc. were pretty active, a New York-based trader said.

The Liberty/Motorola bonds were seen at up slightly at 52.375 against Motorola shares that closed up 0.2% at $75.58. The shares had been slightly lower for much of the session.

The Liberty/MSI paper has been trading and “probably has come in about a point in the last few weeks, but there is support” around the current level, a New York-based trader said.

Also a focus in the secondary market was the Illumina Inc. 0% convertible. Those bonds were trading better on continued momentum, a New York-based trader said.

“The Illumina 0’s have had a good run of late as the stock side has gone from $162.00 to $173.00 in the last week, post earnings,” the trader said.

On Tuesday, the bonds were quoted at 103.25 bid, 103.75 offered versus an underlying share price of $173.20, which was basically unchanged from a dollar-neutral, or swap, perspective.

But the Illumina bond, which trades on a small, 35% delta, is up about 2 to 3 points in the last 1.5 weeks from about par, the trader said.

“It was a good move for an investment-grade, low-delta name,” he said.

There has been a large buyer for the Softbank Group Corp. mandatory exchangeable into Alibaba Group Holding Ltd., which has pushed higher as a result, a second New York-based trader said. They were seen at about 98.25 versus an underlying share price of $122.60.

“The Baba mandatory has gone from 86 to 95 to 98,” the trader said.

In general, there has been a continuation of trading activity in the new issues like DISH and Weatherford International LLC, the trader said, but the markets overall are demonstrating “a lack of conviction.”

Equities slipped on Tuesday from record highs notched on Monday. The Nasdaq Composite index lost 34.90 points, or 0.7%, to 5,227.11, the S&P 500 stock index fell 12 points, or 0.6%, to 2,178.15 and the Dow Jones industrial average shed 84.03 points, or 0.5%, 18.552.02.

New Liberty exchangeable

Liberty Interactive is planning to price a debenture exchangeable into Charter Communications common stock in a private offering, according to a news release late Tuesday.

The Rule 144A debentures will be exchangeable at the option of holders during specified periods. Upon an exchange of debentures, the company may deliver Charter Communications stock, cash or a combination of stock and cash.

Proceeds will be used to repay up to $450 million outstanding under a margin loan facility recently entered into by its wholly owned special purpose subsidiary LV Bridge, LLC; to repurchase its outstanding 0.75% exchangeable senior debentures due 2043; and to satisfy its exchange obligation in cash for holders that tender the 2043 debentures. Any remaining net proceeds will be used for general corporate purposes, including to pay interest on the debentures.

The debentures, as well as the associated cash proceeds, will be attributed to the Liberty Ventures Group.

On Friday, Liberty Media priced $444.6 million of senior debentures exchangeable for common shares of Time Warner, to yield 2.25% with an initial exchange premium of 30%, according to market sources.

The Rule 144A deal was initially talked at $425 million in size. Pricing came at the midpoint of talk, which was for a 2% to 2.5% coupon and 27.5% to 32.5% premium.

The 30-year paper, which matures Sept. 30, 2046, was priced via bookrunners Morgan Stanley & Co. LLC and Citigroup Global Markets Inc.

Liberty Media is an Englewood, Colo.-based media and communications company.

Mentioned in this article:

Alibaba Group Holding Ltd. Nasdaq: BABA

DISH Network Inc. Nasdaq: DISH

Illumina Inc. Nasdaq: ILMN

Liberty Interactive Corp. Nasdaq: QVCA

Liberty Media Corp. Nasdaq: LMCA

Time Warner Inc. NYSE: TWX

Vipshop Holdings Ltd. Nasdaq: VIPS

Weatherford International LLC NYSE: WFT

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