Colfax’s new mandatories hit the market; Booking, Workday active; Weatherford bid up

By Abigail W. Adams

Portland, Me., Jan. 9 – Wednesday began with the first new convertible deal of 2019 hitting the secondary space.

Colfax Corp. priced $400 million of three-year mandatory convertibles prior to the market open on Wednesday. The tangible equity units were active and expanding on debut, sources said.

Meanwhile, the secondary space continued to see robust trading volume with more than $500 million on the tape by the late afternoon.

Sources attributed the high volume in the secondary space since the start of the week to accounts reorganizing their positions.

There were high-yield buyers in the market on Wednesday with several names bid up, a market source said.

Wednesday marked another strong day for oil and gas with crude oil futures catapulting above the $50 threshold.

Weatherford International Ltd.’s 5.875% convertible notes due 2021 and Ensco plc’s 3% convertible notes due 2024 were gaining strength in active trading on Wednesday.

Booking Holdings Inc.’s 0.35% convertible notes due 2020 continued to see active trading on Wednesday after an analyst downgrade of the stock.

Workday Inc.’s 0.25% convertible notes due 2022 and Micron Technology Inc.’s 3% convertible notes due 2043 were also actively traded during Wednesday’s session.

Colfax hits the market

Colfax priced $400 million three-year tangible equity units prior to the market open Wednesday at the midpoint of talk with a dividend of 5.75% and an initial conversion premium of 20%, according to an FWP filing with the Securities and Exchange Commission.

Price talk was for a dividend of 5.5% to 6% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The units were preforming well in the secondary space, a market source said. They were trading up to 101.5 to 102 in decent volume early in the session, the source said.

They were seen trading at 102.5 versus an equity price of $21.10 later in the afternoon.

They were expanded more than 2 points dollar-neutral. More than 3 million of the units had changed hands by the late afternoon.

Colfax, a diversified industrial technology company, is an unusual name for a mandatory convertible, the source said.

However, the deal was heard to be oversubscribed during bookbuilding with the demand following it into the secondary space.

Colfax’s common stock was largely flat for the majority of Wednesday but saw a slight rally into the afternoon to close the day at $21.16, an increase of 1.68%.

Energy strong

Wednesday marked another strong day for oil and gas names with crude oil futures shooting up more than 5%.

Several names that were crushed in the final weeks of December continued to make gains on Wednesday as the broader energy sector rallied.

Weatherford’s 5.875% convertible notes due 2021 were seen at 65.75 bid Wednesday afternoon, according to a market source.

The notes closed out 2018 at 62.5, according to Trace data.

Ensco’s 3% convertible notes due 2024 also continued to make gains in active trading. The notes rose 1 point outright to 76 with the yield now 9%.

Ensco’s 3% convertible notes were major volume movers throughout last week with the notes rebounding from their lows.

The notes closed 2018 at 64.75.

Crude oil futures continued their upward momentum on Wednesday catapulting past the closely watched $50 threshold to settle at $52.36, an increase of 5.2%.

Volume movers

Booking Holdings’ 0.35% convertible notes due 2020 saw high-volume trading early in Wednesday’s session, although activity petered off into the afternoon.

The 0.35% convertible notes dropped about 3 points outright to 130. Booking’s stock closed Wednesday at $1,649.49, a decrease of 2.22%.

Booking’s stock was under pressure after analyst downgrades from Jefferies Financial Group and Morgan Stanley on Wednesday.

Workday’s 0.25% convertible notes due 2022 were active during Wednesday’s session although the notes were little changed on an outright basis.

The 0.25% convertible notes were changing hands around 127.75, according to Trace data. Workday stock traded as high as $169.00 before closing the day at $166.18, a decrease of 0.46%.

Micron’s 3% convertible notes due 2043 again saw heavy trading volume in the secondary space. The notes rose 6 points outright as stock jumped after another analyst upgrade.

The 3% notes traded as high as 124.5 by the late afternoon.

Micron stock closed Wednesday at $35.44, an increase of 5.04%. Micron stock was upgraded by an analyst at Sanford C. Bernstein to “outperform” from “market perform.”

The upgrade follows an upgrade to “outperform” from “market perform” from BMO Capital Markets on Monday with the price target raised to $50.00.

Mentioned in this article:

Booking Holdings Inc. Nasdaq: BKNG

Colfax Corp. NYSE: CFX

Ensco plc NYSE: ESV

Micron Technology Inc. Nasdaq: MU

Weatherford International Ltd. NYSE: WFT

Workday Inc. Nasdaq: WDAY

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