Intel, Aerojet convertibles active; Pandora better; Arconic contracts on failed buyout

By Abigail W. Adams

Portland, Me., Jan. 22 – The convertible secondary space opened the abbreviated week quietly with few names seeing concentrated trading activity, according to a market source.

Tesla Inc.’s convertible notes remained in focus as stock continued to drop following news last Friday the electric car manufacturer was slashing its workforce.

The B and C tranches were contracted while the soon-to-mature A tranche continued to trade around par.

Intel Corp.’s 3.25% convertible notes due 2039 were among the most actively traded in the secondary space with a large seller in the market, a market source said.

Aerojet Rocketdyne Holdings, Inc.’s 2.25% convertible notes due 2023, an issue not normally seen on the tape, were also active during Tuesday’s session with the notes dropping outright alongside stock.

Pandora Media Inc.’s 1.75% convertible notes due 2020 were making gains on an outright basis after Sirius XM Holdings Inc. launched consent solicitations related to its acquisition of the music streaming service.

Arconic Inc.’s 1.625% convertible notes due Oct. 15, 2019 were dropping on an outright and dollar-neutral basis as stock tanked after the aerospace and auto parts maker rejected a buyout offer from Apollo Global Management.

Tesla in focus

Tesla’s convertible notes were flat to slightly contracted on Tuesday with the notes continuing to actively trade with stock again off after the electric car manufacturer announced it was slashing 7% of its full-time workforce last Friday.

The 0.25% convertible notes due March 1, 2019 continued to trade around par.

While Tesla stock is now well below the $359 conversion price on the notes, some sources were confident the company would be able to handle the $920 million principal amount of the maturing notes.

If the notes are unable to be converted out, Tesla would be able to refinance them to extend the maturity, a source said.

Tesla’s 1.25% convertible notes due 2021 were contracted about 0.25 point dollar-neutral, a market source said.

The notes were the most active out of the three tranches and were changing hands at 106.5 on an outright basis.

Tesla’s 2.375% convertible notes due 2022 were contracted about 0.375 point dollar-neutral, a market source said. They were changing hands at 114.5 on an outright basis.

Tesla stock traded as high as $308.00 and as low as $295.50 during Tuesday’s session before closing the day at $298.92, a decrease of 1.11%.

Intel active

Intel’s 3.25% convertible notes due 2039 were among the most active in the secondary space, according to a market source.

The notes were changing hands at 237.375 early in the session, a market source said.

They dropped alongside Intel stock and traded just shy of 234 later in the afternoon.

The notes are essentially an equity surrogate, a market source said.

Intel stock traded as low as $47.87 during Tuesday’s session but closed the day at $48.27, a decrease of 1.87%.

Intel is slated to report earnings after the market close on Thursday.

Aerojet down outright

Aerojet’s 2.25% convertible notes due 2023 were also active during Tuesday’s session.

The notes were changing hands just shy of 159 early in the session. The notes continued to trade down into the afternoon and closed the day just shy of 156, sources said.

Aerojet stock traded as low as $37.57 during Tuesday’s session but closed the day at $38.09, a decrease of 1.53%.

Pandora improves

Pandora’s 1.75% convertible notes due 2020 were making gains on an outright basis after Sirius XM Holdings launched consent solicitations related to its acquisition of the music streaming service.

The 1.75% convertible notes rose 2 points outright to close Tuesday just north of 97, according to a market source.

Pandora stock closed Tuesday at $8.40, a decrease of 3.23%.

Sirius announced Friday that it was seeking consent to amend the indentures governing the convertible notes to enable the merger.

Sirius has secured the consent of a beneficial owner of $60 million of the convertibles, or 39.5% of the principal amount of the 1.75% notes due 2020, Prospect News reported.

Sirius will guarantee the payment of the convertible notes following the acquisition.

Arconic contracts

Arconic’s 1.625% convertible notes due Oct. 15, 2019 were down on both an outright and dollar-neutral basis after the aerospace and auto parts maker rejected a buyout proposal from Apollo Global Capital Management.

The 1.625% convertible notes were trading north of par on Friday, a market source said.

They closed Tuesday at 98.625 and were contracted about 1 point dollar-neutral.

Arconic stock was off 20% in intra-day trading. Stock traded down to $16.12 during Tuesday’s session but closed the day at $17.09, a decrease of 15.98%.

The 1.625% convertible notes were trading on the hopes “of a kiss” from the takeout grid if Apollo’s buyout of the company materialized prior to the notes’ maturity, a market source said.

However, Arconic’s board of directors rejected Apollo’s $10.7 billion buyout offer for the company, stating it was not in the best interest of shareholders and other stakeholders, according to a company press release.

Mentioned in this article:

Aerojet Rocketdyne Holdings, Inc. NYSE: AJRD

Arconic Inc. NYSE: ARNC

Intel Corp. Nasdaq: INTC

Pandora Media Inc. NYSE: P

Tesla Inc. Nasdaq: TSLA

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