Tesla convertibles firm as market bets on earnings; Microchip, Golar in play; OSI on tap

By Stephanie N. Rotondo

Seattle, Feb. 15 – Tesla Inc.’s convertibles were taking some of the focus away from recently priced issues in midweek trading.

The company’s stock has been climbing up toward record highs in recent weeks as the market attempts to decipher what upcoming earnings will look like. The latest quarterly report, expected Feb. 22, is the first since the closing of the SolarCity merger in November.

As speculation circulates, Tesla’s 1.25% convertible notes due 2021 closed the day about unchanged in a 100.5 to 101.125 context, while the 0.25% convertible notes due 2019 dipped to just under 101.

Earlier in the session, a market source said the 1.25% convertibles were steady to half a point better, trading in a 101 to 101.5 context. The 0.25% convertibles were deemed not as active as the 1.25% convertibles but were also placed in a similar range.

As for the underlying stock, it declined $1.22 to $279.76. The shares were up 29 cents at $281.27 at mid-morning.

Because of the uncertainty of how Tesla will include SolarCity figures in its results, estimates for the quarter have been all over the place, swinging from a loss at one desk to a profit at the other.

The market is also hoping to hear an update on the company’s Model 3 rollout.

While Tesla did emerge as notable on Wednesday, there did continue to be at least some activity in recently priced issues.

Microchip Technology Inc.’s 1.625% convertible notes due 2027 saw a resurgence of trading, inching up half a point to 100.5, according to one sellside source. The 2.25% convertible notes due 2037 were more active than they were in the previous session, trading up 0.25 to 0.5 point, straddling 101.

The company’s common stock added for the second-straight session, closing up $1.12, or 1.58%, to $71.90.

Microchip brought the issues on Friday, selling $1.8 billion of the 1.625% convertibles and $500 million of the 2.25% convertibles.

As for Golar LNG Ltd.’s 2.75% convertible notes due 2022 – a $350 million issue priced ahead of Tuesday’s open – liquidity in that issue died down a bit.

The paper retreated to a 101 handle from levels around 103.375 previously.

The company’s shares also waned, dipping 73 cents, or 2.6%, to $27.30.

OSI set to price

OSI Systems Inc. was slated to price its $225 million offering of convertible notes due 2022 after the market closed on Wednesday.

However, pricing details were not available as of press time.

Price talk is for a yield of 1.125% to 1.625% and a conversion premium of 35% to 40%. Pricing is expected after the close.

BofA Merrill Lynch, Wells Fargo Securities LLC, J.P. Morgan Securities LLC and Jefferies are leading the deal.

Ahead of pricing, the company’s equity was up 86 cents, or 1.12%, to $77.59.

Conversions will be settled with cash, common stock or a combination, at the company’s option.

The notes are callable on or after March 6, 2020, but only if the stock price hits a 130% price hurdle.

Proceeds will be used to repay borrowings under a credit facility, to repurchase up to $50 million shares of common stock from buyers of the new convertibles and for general corporate purposes.

OSI is a Hawthorne, Calif.-based vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications in the homeland security, health care, defense and aerospace industries.

Bunge better post-earnings

Bunge Ltd.’s 4.875% cumulative convertible perpetual preference shares (OTCBB: BGEPF), as well as its common equity, were boosted by better-than-expected quarterly results on Wednesday.

The preference shares gained $3.72, or 3.7%, to end at $104.39, on over 10 times the average daily volume.

The common stock meantime rose $6.85, or 10.03%, to $75.14.

For the fourth quarter, the White Plains, N.Y.-based global agribusiness and food company reported net income of $262 million, or $1.82 per share, versus $188 million, or $1.30 per share, the year before.

On an adjusted basis, EPS was $1.70.

Net sales improved 8.6% year over year.

Analysts polled by Thomson Reuters had forecast adjusted EPS of $1.57. Revenue also came in above expectations.

The company attributed its stellar quarter – and its continued expectations for strong growth – on massive corn and soybean harvests in South America. Higher sugar and ethanol prices, as well as better edible oil margins in Brazil, also played a role.

Mentioned in this article:

Bunge Ltd. NYSE: BG

Golar LNG Ltd. Nasdaq: GLNG

Microchip Technology Inc. Nasdaq: MCHP

OSI Systems Inc. Nasdaq: OSIS

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