Convertibles trading thin as equities tank; ON Semiconductor, Workday, Ctrip.com active

By Abigail W. Adams

Portland, Me., Aug. 5 – Trading activity in the convertibles secondary space was light on Monday with an ugly start to the week for equities with China retaliating against U.S. president Donald Trump’s threatened tariffs.

The Chinese yuan slid to the lowest level against the dollar in more than a decade and Beijing reportedly encouraged companies to cancel their purchase of U.S. agricultural goods as trade war tensions ratchet up.

The Dow Jones industrial average dropped 600 points shortly after the opening bell, plunged as much as 950 points into the afternoon and closed the day down 767 points.

The Nasdaq composite was down 3% shortly after the opening bell and closed the day down 3.47%. The S&P 500 was down 2.35% shortly before 11 a.m. ET and closed the day down 2.98%.

Many stayed on the sidelines as the sell-off in equities intensified.

There was about $48 million in reported volume a little over one hour into Monday’s session and $276 million on the tape heading into the market close.

The tech sector was among the hardest hit from the intensifying trade battle with the convertible notes of several issuers trading down alongside stock.

Workday Inc.’s 0.25% convertible notes due 2022 were among the most actively traded issues in the secondary space.

The notes were down on both an outright and dollar-neutral basis, sources said.

ON Semiconductor Corp.’s convertible notes were also active as the company’s equity sold off on mixed earnings in addition to exposure to the trade war.

Ctrip.com International Ltd.’s three tranches of convertible notes were also among the major volume movers of Monday’s session as the equity of the Shanghai-based provider of travel services also sold off amid the intensifying trade battle.

Workday comes in

Workday’s 0.25% convertible notes due 2022 were in focus on Monday with the notes down on both an outright and dollar-neutral basis.

The 0.25% convertible notes dropped about 5.5 points outright. They were changing hands at 140.25 versus an equity price of $188.25, according to a market source.

The notes were coming in about 0.25 point dollar-neutral.

With more than $21 million in reported volume by the late afternoon, the notes were among the most actively traded issues during Monday’s session.

Workday stock traded as high as $191.64 and as low as $185.32 before closing the day at $188.15, a decrease of 3.92%.

ON Semiconductor’s earnings

ON Semiconductor’s convertible notes were active and traded down on an outright basis alongside stock following a mixed earnings report and exposure to the intensifying trade war.

ON’s 1% convertible notes due 2020 dropped more than 8 points outright. They were changing hands at 115.25 early in the session and continued to trade down into the afternoon.

The notes were trading at 113.625 versus an equity price of $17.87 about an hour before the closing bell, according to a market source.

More than $18 million of the bonds were on the tape by the late afternoon.

ON’s 1.625% convertible notes due 2023 were also down about 8 points outright. They were changing hands at 116 versus an equity price of $17.89 in the late afternoon.

The 1.625% convertible notes saw about $6 million in reported volume by the late afternoon.

ON Semiconductor’s stock traded as high as $18.75 and as low as $17.75 before closing the day at $17.84, a decrease of 10.71%.

In addition to exposure to the trade war, ON Semiconductor reported mixed earnings prior to the market open.

ON reported earnings per share of 42 cents for the second quarter, which were in line with analyst expectations.

However, revenue of $1.348 billion missed analyst expectations for revenue of $1.384 billion.

Ctrip.com active

Ctrip.com’s three tranches of convertible notes were on the tape on Monday with the notes under pressure as the Shanghai-based travel company’s equity sold off.

Ctrip’s 1.99% convertible notes due 2025 traded down 3 points outright. They were changing hands at 105.6 versus an equity price $33.29 in the late afternoon, according to a market source.

The 1% convertible notes due 2020 were down a little more than 1 point to 97.75.

The 1.25% convertible notes due 2022 were down about 0.25 point outright to 99.625.

Ctrip’s American Depositary Shares traded as high as $35.01 and as low as $32.72 before closing the day at $33.47, a decrease of 8.15%.

Ctrip’s 1% convertible notes went current in July with the maturity of the outstanding $700 million less than a year out.

The company has long been rumored to be exploring a new convertible notes offering. However, the offering has yet to materialize.

The trading activity on Monday may have been the result of a company buyback of the outstanding bonds, a market source said.

Mentioned in this article:

Ctrip.com International Ltd. Nasdaq: CTRP

ON Semiconductor Corp. Nasdaq: ON

Workday Inc. Nasdaq: WDAY

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