United States Steel convertibles drop with shares; Illumina notes active; Winnebago up

By Rebecca Melvin

New York, Dec. 20 – United States Steel Corp.’s 5% convertibles were trading down along with the underlying common shares of the company in strong volume on Friday, according to a market source.

The U.S. Steel notes, which are due in 2024, were seen down more than 2 points on an outright basis to about 116 at late morning. The paper started the day around 118.75 and was last 116, with the bulk of trades getting done in the area of 117.

A pair of Illumina Inc. convertibles were trading with shares moving up on Thursday into early Friday.

The Illumina 0.5% notes due 2021 were up nearly a point to 137.5, according to Trace data. The Illumina 0% notes due 2023 were seen up 0.6 point to 110.66.

Illumina shares were up $3.26, or 1%, at $328.53.

Winnebago Industries Inc.’s convertibles saw a notable jump up in pricing by nearly 6 points on an outright basis after the RV maker reported better-than-expected sales and earnings for its fiscal first quarter. The company said stronger demand for trailers and the impact of its acquisition of Newmar Corp. explained the positive result.

The Winnebago 1.5% notes of 2025 jumped 5.9 points to 107.84. Shares gained $3.86, or 8%, to $51.94.

Tesla Inc.’s convertibles, which have been a feature of trade this past week, as the underlying shares passed the $400 per share mark, were notably quiet. Only the Tesla 1.25% notes due 2021 were seen to have traded early Friday and they were at 125.40 with the underlying shares around $404.00. The Tesla 2% notes and Tesla 2.375% notes did not appear to have traded, according to a market source.

No new issues were brought this past week in the U.S. convertibles market, but the secondary market remained fairly active during the last full week of 2019 ahead of the Christmas holiday. The primary was expected to remain quiet again next week but with a fairly quick restart predicted for the first or second week of 2020.

“I don’t think it will take too long, we have some things up our sleeves,” a syndicate source said. Further details were not provided.

U.S. Steel sinks

U.S. Steel’s 5% convertibles dropped more than 2 points to about 116. U.S. Steel shares were also down and last off $1.10, or 8.2%, at $12.25.

The shares had dropped in after-hours trading on Thursday, having closed the session at $13.35. At the market close, the Pittsburgh-based steelmaker announced that its fourth-quarter results will be worse than expected and that it planned to slash its dividend, suspend stock repurchases, suspend some operations and lay off some workers.

In two news releases, the steelmaker said it now expects to report an adjusted loss of $1.15 a share in the fourth quarter, which is a greater loss than the 62 cent per share adjusted loss previously forecast.

The company is reducing its quarterly dividend to a penny a share from five cents and is halting buybacks. It is also planning to shutter a plant near Detroit starting April 1, 2020. The shutdown will involve 1,545 workers. But the final number of employees who will be impacted by the idling of the plant will be less, the company said.

U.S. Steel also adjusted its capital spending forecast for 2020, lowering it by $75 million to $85 million. Shares dropped as much as 3% in after-hours trading following the announcement.

The 5% bond was the most actively traded issue on Friday with more than $12.5 million of bonds having changed hands by late Morning.

Trading in the Illumina 0.5% convertible was the next most-active bond, with more than $10 million of bonds having traded in the same timeframe.

In contrast, Winnebago, which had an impressive price move, saw only $3 million of bonds change hands in the same timeframe.

Illumina Inc. Nasdaq: ILMN

Tesla Inc. Nasdaq: TSLA

United States Steel Corp. NYSE: X

Winnebago Industries Inc. NYSE: WGO

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