Kaman 3.25% convertibles in focus; trading light as many underlying shares strengthen

By Rebecca Melvin

New York, Aug. 29 – Convertibles trading was light on Thursday as market activity tapered heading into the long Labor Day holiday weekend. The underlying shares of many convertible notes were sharply higher as energy led gains.

The shares of Vishay Intertechnology Inc. and Transocean Inc. sported better than 5% gains during the session, spurring some trades in the convertibles of those companies. In addition, DISH Network Corp. shares, which slid lower at the beginning of the month, lifted by about 1% on the day, and the company’s 3.375% convertibles printed nearly a point higher at 92.1, according to Trace data.

Meanwhile, Kaman Corp. announced that holders of its $200 million of 3.25% convertible senior notes due 2024 may put their notes at par plus interest or convert into shares and cash as the result of a fundamental change.

Market players were considering whether Kaman holders will put or convert.

“I think it depends on where stock is as we get closer to the deadline. According to offer details, the conversion ratio adjusted for fundamental change is 18.0709. With Kaman stock around $57.30, parity equals about 103.50,” a New York-based market source said. “But you’ll probably lose the accrued [interest] on conversion, which is presently 1.1 pts, and which will be 1.3 pts on Sept. 26. So, your indifference point is probably just north of $56 in stock.”

The Bloomfield, Conn.-based maker of proprietary aircraft bearings and components announced the offer following the close of the previously announced share purchase agreement for the company by Kaman, LJ KIT Blocker, Inc., LJ KAI Blocker, Inc. and LJ KFP Blocker Inc. Kaman shares were up $1.45, or 2.6%, at $57.87.

In addition, Whiting Petroleum Corp. announced a tender offer to purchase up to $300 million of its 1.25% convertible senior notes due 2020.

The company is offering to pay a cash amount equal to $990 per $1,000 principal amount of notes purchased.

The primary market was quiet again with the next new convertible issuance expected to be seen after the Labor Day holiday on Sept. 2. Financial markets in the United States will be closed on Sept. 2.

In economic news, the Commerce Department on Thursday revised slightly lower its estimate of overall second-quarter economic growth to an annual rate of 2.0%, compared to the previous estimate of 2.1%. Weighing on growth were the housing sector, exports and inventory investment and a pullback in business spending, while consumer spending was a boost. Data from the third quarter so far indicate the manufacturing sector continued to struggle as U.S. industrial output fell in July.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

Kaman Corp. NYSE: KAMN

Transocean Ltd. NYSE: RIG

Whiting Petroleum Corp. NYSE: WLL

Vishay Intertechnology Inc. NYSE: VSH

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