Parker Drilling’s new preferreds fizzle; fresh earnings drive movement in DISH, Tesla

By Stephanie N. Rotondo

Seattle, Feb. 22 – There was more activity in the convertible bond market on Wednesday, though the action did not appear to have trickled down to Parker Drilling Co.’s new $50 million of 7.25% $100-par series A mandatory convertible preferreds.

“There are no quotes around at all,” a trader said.

Barclays ran the books.

In earnings news, an unexpected increase in subscribers boosted DISH Network Corp.’s bottom line, according to the company’s latest earnings release.

In response, the company’s 3.375% convertible notes due 2026 were “up small,” a trader said.

However, the stock traded off of the day’s highs, ultimately ending lower.

Tesla Inc. also announced quarterly results on Wednesday. Despite posting a smaller loss and beating revenue expectations, the car maker’s convertibles were unchanged to weaker.

Continuing the earnings trend, Depomed Inc. released its results after Tuesday’s close. A sales increase pleased investors, who then pushed up the company’s convertible debt, as well as its equity.

Away from earnings, Microchip Technology Inc.’s 1.625% convertible notes due 2027 were busy, trading in a 100.375 to 101 range, according to a trader.

Another market source placed the paper at 101.25, an outright gain of 1.25 points.

The stock traded up for the session, adding 56 cents to close at $73.04.

Parker prices preferreds

Parker Drilling sold $50 million of 7.25% $100-par mandatory convertible preferreds on Wednesday, with an initial conversion premium of 15%.

The yield came at the cheap end of the 6.75% to 7.25% price talk, as well as the cheap end of the 15% to 20% premium talk.

But traders reported that there was little action in the new issue. The company’s equity was beaten down, falling 40 cents, or 17.02%, to $1.95.

Though there wasn’t much volume in the new deal, the equity saw well above-average trading.

The mandatory conversion date is March 31, 2020.

Conversions will be done between a minimum of 41.4079 shares per each preferred and a maximum of 47.6190 shares. The initial reference price is $2.10, equal to 100 divided by the maximum conversion rate. The threshold appreciation price is $2.4150, equal to 100 divided by the minimum conversion rate.

Holders can convert the preferreds earlier than the mandatory conversion date at the minimum conversion rate. Early conversion can also occur upon a fundamental change at the fundamental change rate, plus a cash make-whole dividend.

Proceeds will be used for general corporate purposes, including working capital, capital expenditures, acquisitions or the repayment, redemption or refinancing of debt.

Parker Drilling is a Houston-based provider of drilling services and rental tools to the energy industry.

DISH earnings surprise

DISH Network’s latest quarterly results came in better than expected on Wednesday, which helped the company’s 3.375% convertibles trade a little better.

One trader pegged the convertibles around the 122 mark. Another source deemed the paper unchanged to a quarter-point higher at 121.5 bid, 122.5 offered.

The underlying equity initially traded higher but came off of the day’s highs, ending off 42 cents at $62.40.

Net income was $343 million, or 70 cents per share. That compared to a loss of $125 million, or 27 cents per share, the year before.

Revenue declined to $3.72 billion from $3.78 billion.

Analysts polled by Thomson Reuters had expected EPS of 66 cents on revenue of $3.76 billion.

The profit bump surprised the market. DISH said that its bottom line was improved by a gain of 28,000 subscribers, versus a loss of 12,000 subscribers during the same quarter of 2015.

Analysts had estimated that DISH would lose 87,000 subscribers.

DISH is an Englewood, Colo.-based satellite services provider.

Tesla numbers beat

Tesla’s convertible bonds – as well as its stock – were pressured on Wednesday, on the back of the company’s earnings release.

However, the results were better than expected.

The 1.25% convertible notes due 2021 slipped 1.5 points outright to 98.65, according to a market source. The 0.25% convertible notes due 2019 managed to hold steady at 100.25.

Tesla’s shares slipped $3.88, or 1.4%, to $273.51.

For the fourth quarter, Tesla reported an adjusted loss per share of 69 cents on revenue of $2.28 billion. Analysts polled by Bloomberg had forecast an adjusted loss of $1.04, on revenue of $2.13 billion.

The beat came in the first earnings release seen since Tesla acquired SolarCity for $2.6 billion.

Tesla is based in Palo Alto, Calif.

Depomed sees sales gain

Newark, Calif.-based Depomed reported a 33% increase in net product sales in 2016, which helped to push up its 2.5% convertible notes due 2021.

A market source saw the issue ending just south of 112, which was a gain of about 3 points outright.

Another source deemed the issue up over 7 points outright at 112.25.

The company’s stock firmed $1.48, or 9.38%, to $17.25.

Based on its yearly results, Depomed reported a net loss of $1.45 per share. On an adjusted basis, the company saw earnings of $1.15.

Sales came to $455 million for the year. For the fourth quarter, sales came to $124 million, an 11% gain year over year.

EBITDA also improved, rising to $156 million from $111 million in 2015.

Mentioned in this article:

Depomed Inc. Nasdaq: DEPO

DISH Network Corp. Nasdaq: DISH

Microchip Technology Inc. Nasdaq: MCHP

Parker Drilling Co. NYSE: PKD

Tesla Inc. Nasdaq: TSLA

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