Yahoo! drops outright, gains on hedge; new XenoPort pops; Performant shares crushed

By Rebecca Melvin

New York, Jan. 29 – Convertibles players remained focused Thursday on this week’s onslaught of earnings reports and eyed performance for January as the month-end loomed. One new issue in the market did pretty well, but was a small deal, allocated on a restricted basis and not widely traded, market sources said.

“It’s been a pretty good month; people are pretty happy,” a New York-based trader said, attributing the sanguine tone to stock volatility this past month that has helped convertibles and the fact that valuations held in.

Yahoo! Inc.’s convertibles were down sharply on an outright basis, but much better on a dollar-neutral, or hedged, basis, a New York-based trader said.

In the primary market, XenoPort Inc.’s new 2.5% convertibles traded up in the early going Thursday, according to Trace data, after the Santa Clara, Calif.-based biopharmaceutical company priced $100 million of the seven-year senior notes in an overnight deal with a 22.5% premium.

The XenoPort 2.5% convertibles were seen changing hands at 105.5, according to Trace data. Shares were up fractionally at $8.82.

A second convertibles deal in the market by Performant Financial Corp. is for $80 million of notes seen pricing late Thursday or early Friday. Shares of the company were punished Thursday on the heels of the launch of the convertibles deal and concurrent offering of $50 million of common stock.

Performant Financial shares plunged $1.66, or 28%, to $4.21 on Thursday.

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