Benefitfocus on tap; Micron drops outright, expands dollar-neutral; Insmed contracts

By Abigail W. Adams

Portland, Me., Dec. 19 – Wednesday marked another volatile day for equities with markets showing positive momentum in the run up to the Federal Reserve’s rate hike decision, only to collapse after the rate hike was announced.

While markets were largely expected to respond favorably to a deceleration in the pace of rate increases in 2019, the Dow Jones industrial average closed Wednesday down 351 points after opening the day up 200 points.

However, the largest surprise for the convertibles universe came after the market close with the launching of a new deal.

Benefitfocus, Inc. plans to price $200 million five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 30% to 35%, according to a market source.

J.P. Morgan Securities LLC is the bookrunner for the Rule 144A deal, which carries a greenshoe of $40 million.

While some sources said “never say never,” many were under the impression that new deal activity had largely run its course for 2018.

Meanwhile, technology names and cash alternative convertibles were in focus in the secondary space, sources said.

Micron Technology Inc.’s 3% convertible notes due 2043 topped the volume charts after the stalwart of the semiconductor sector released first-quarter earnings.

The notes dropped outright but expanded dollar-neutral as stock sank in the wake of the report.

Intel Corp.’s 3.25% convertible notes due 2039 and Western Digital Corp.’s 1.5% convertible notes due 2024 were also among the volume leaders with large sellers in the market.

Insmed Inc.’s 1.75% convertible notes due 2025 also saw some activity on Wednesday with the notes contracting.

Micron expands

Micron’s 3% convertible notes due 2043 were in focus in the secondary space after the semiconductor company’s stock sank in the wake of first-quarter earnings.

The notes dropped about 9 points outright.

They were seen at 110.5 bid, 111 offered in the late afternoon. The notes expanded about 0.625 point dollar-neutral, a market source said.

More than $20 million of the bonds were on the tape by the late afternoon.

Micron stock closed Wednesday at $31.41, a decrease of 7.92%.

Micron reported non-GAAP earnings per share of $2.97 for the first quarter, which were largely in line with analyst expectations.

However, Micron missed with revenue of $7.91 billion versus analyst expectations for revenue of $8.02 billion.

Stock was largely trading off on the semiconductor’s announcement there would be a pullback in the current quarter with sales estimates of $5.7 billion to $6.3 billion, thestreet.com reported.

Micron stock was downgraded by BMO Capital Markets, Needham & Co. LLC and RBC in the wake of the report.

Micron’s projections for decreased demand for memory chips dragged down other names in the semiconductor sector. The PHLX Semiconductor index closed Wednesday down 5.96%.

Volume movers

Intel’s 3.25% convertible notes due 2039 were among the volume movers in the secondary space with a large seller in the market, a source said.

The notes changed hands at 231.

Intel’s stock was off slightly for most of the day but plummeted toward the market close, ending the day at $45.54, a decrease of 4.6%.

Western Digital’s 1.5% convertible notes due 2024 also remained active in the secondary space.

The 1.5% notes were largely trading flat at 82.75, a source said. Western Digital stock closed Wednesday at $36.58, a decrease of 5.53%.

Insmed contracts

Insmed’s 1.75% convertible notes due 2025 were under pressure in active trading on Wednesday.

The notes dropped to 71, marking the lowest outright level for the notes since they priced in January.

They were contracted about 1.25 points dollar-neutral, a market source said.

Insmed stock closed Wednesday at $13.05, a decrease of 4.61%.

End-of-year selling was putting pressure on the notes, a market source said, with no fundamental reason for the downdraft.

Mentioned in this article:

Benefitfocus, Inc. Nasdaq: BNFT

Insmed Inc. Nasdaq: INSM

Intel Corp. Nasdaq: INTC

Western Digital Corp. Nasdaq: WDC

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