Twitter debt weakens as S&P cuts to junk; SunEdison softens; Yahoo! gives up early gains

By Stephanie N. Rotondo

Phoenix, Nov. 13 – Recent issuer-specific news was driving activity in the convertible bond market in Thursday trading.

According to one trader, Twitter Inc., SunEdison Inc. and Yahoo! Inc. were dominating trading in the space. Each of those names had fresh news out on Wednesday.

For Twitter, the company held its first analysts day on Wednesday. During the conference, the company gave more details on how it plans to grow its business, and investors initially seemed pleased with the scheme. But then Standard & Poor’s cut the company’s debt to junk status and the gains disappeared.

SunEdison meantime announced on Wednesday that it had found a partner in the Philippines to build solar power plants. But investors didn’t seem overly pleased with the deal, likely on concerns about the company’s higher-than-average debt leverage.

In Yahoo! paper, the convertible notes were up slightly in early trading, but finished the day unchanged. The moves came as two of the company’s top investors reportedly sought to encourage a merger between Yahoo! and AOL. AOL management is said to be receptive to the idea.

Twitter finishes weaker

Twitter held an analyst day on Wednesday, giving a presentation on how it plans to grow in the coming years.

The news initially pushed the company’s convertible debt higher, but then S&P gave the company an unsolicited junk rating of BB-, and the wheels came off a little bit.

The 0.25% convertible notes due 2019 traded as high as 92 early in the day, up slightly from Wednesday levels. But they ended at 89.75 bid, 90.75 offered.

The 1% convertible notes due 2021 were also a touch weaker at 89.75.

The company’s stock closed down $2.50, or 5.88%, to $40.04. The equity was up 44 cents at mid-morning, trading at $42.98.

During the analyst day, Twitter management said it planned to release new products to attract new users as well as ways to improve the user’s experience, such as better messaging and more-targeted notifications.

But in its ratings review, S&P said the changes could take years and as such, it could be awhile before investors see any upside.

SunEdison ends lower

SunEdison has inked a deal with Aboitiz Renewables Inc. to develop and operate solar power plants that generate up to 300 megawatts of power in the Philippines, according to an announcement made Wednesday.

While the news is similar to deals SunEdison has made in India and China, investors weren’t much pleased, and the convertible debt drifted lower as a result.

The 2.75% convertible notes due 2021 fell to 138.5 from 142. The 0.25% notes due 2020 closed at 94.25, down from 94.75 previously.

The stock underlying the bonds ended off $1.03, or 5.76%, to $16.84.

Investors could be concerned about the company’s debt-to-equity ratio, which is higher than the industry average at 15.07. Gross profit margins are also low at 18.2%.

Yahoo! holds steady

Yahoo!’s convertible bonds were up a touch in early trading but came in to end the day unchanged.

The 0% convertible notes due 2018 ended with a 112 handle. The equity – also initially higher – settled back in to close down a dime at $50.50. The paper was up 21 cents at $50.81 at mid-morning.

Reuters reported Wednesday that two of the company’s top investors – which were unnamed in the article – have approached AOL regarding a merger with Yahoo!, as they are not pleased with the turnaround effort being put forth by Marissa Meyer.

Meyer took over the post of chief executive officer in 2012 and has been trying to improve sales and earnings.

The investors reportedly think Meyer isn’t doing enough, nor is she doing enough to capitalize on its holdings in Alibaba.

AOL is said to be receptive to the idea, which could save both companies as much as $1.5 billion in expenses.

Mentioned in this article:

SunEdison Inc. NYSE: SUNE

Twitter Inc. NYSE: TWTR

Yahoo! Inc. Nasdaq: YHOO

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