AMD active, trades ‘in line’ with shares; other newer issues quiet; equity markets rebound

By Rebecca Melvin

New York, Sept. 12 – Advanced Micro Devices Inc.’s 2.125% convertibles continued to trade actively on Monday after the $700 million issue debuted in the market on Friday. The AMD bonds stabilized right around par after some selling pulled it below par and despite a higher price for the common stock that underlies the bond.

“The AMD definitely traded actively, and it was flat, or right about in line,” a New York-based trader said.

AMD dominated the session’s trading action, but otherwise the convertible market was particularly quiet despite a rebound in U.S. equity markets.

U.S. stocks snapped back after a slump on Friday amid rate fears. The Dow Jones industrial average rose 239.6 points, or 1.3% to 18,325.07; the S&P 500 stock index gained 31.23 points, or 1.5%, to 2,159.04; and the Nasdaq stock market rose 85.98 points, or 1.7%, to 5,211.89.

Meanwhile, Citrix Systems Inc.’s 0.5% convertibles due 2019 changed hands down about a point to 112.37, according to Trace data. The lower price came despite a better common stock for the Fort Lauderdale, Fla.-based cloud computing company. Shares were up 19 cents, or 1%, at $17.08.

Fellow tech name, NXP Semiconductors NV also crossed the Trace tape, with the NXP 1% convertibles due 2019 trading at 109.5, which was essentially unchanged on the day. Akamai Technologies Inc.’s 0% convertibles due 2019 also traded and were down about 0.2 point at nearly 97. The common shares of all three of these tech names were up between 1% and 2% on the day.

The bias for convertibles was negative on an outright basis to start the day, but as things improved in the equity markets, convertibles followed suit, a source said. The overall tone was quiet, however.

“I think Mondays are typically slow, and guys were a bit nervous from the sell-off on Friday,” a New York-based trader said.

On Friday, the Dow dropped 2% and the S&P 500 and Nasdaq stock indices lost 2.5% each. But last week was a good one for the convertibles market. In the shortened, four-day holiday week, there were five new deals launched and priced for $2.33 billion in base-deal proceeds, or $2.61 billion if over-allotment options are exercised.

AMD flat

AMD’s 2.125% convertibles changed hands at 100.375 in the early going compared to the shares that were up 5 or 6 cents, or about 1%, to $5.955. That was down from 101.5 bid, 102 offered versus an underlying share price of $6.10 at late morning on Friday. Although it was closer to par at the end of Friday when shares were about $6.00.

AMD was the most actively traded name of the day, and with its dollar price right around 100, it will react to moves in the underlying equity.

“It should be interesting,” a trader said.

It traded outright at the start of Monday at 99.75, and one of the last trades of the day was 100.15.

Shares of the Sunnyvale, Calif.-based chip maker closed up just 4 cents, or 0.7%, at $5.94.

The upsized $700 million of 10-year convertible senior notes priced at par to yield 2.125% with an initial conversion premium of 33%. Pricing came beyond the rich end of talked terms for a 2.375% to 2.875% coupon and a 25% to 30% premium.

AMD also priced $600 million of common shares at $6.00 each, concurrently with the convertibles.

Joint bookrunners are Morgan Stanley & Co. LLC, Barclays, Credit Suisse Securities (USA) LLC, BofA Merrill Lynch and Wells Fargo Securities LLC.

The notes are non-callable with no puts, and there is takeover and dividend protection. There is also net share settlement.

Proceeds will be used to repay up to $226 million of borrowings under an amended and restated loan agreement and to purchase up to $1 million of the company’s straight notes, with any remaining proceeds to be used for capital expenditures, working capital or other general corporate purposes.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Akamai Technologies Inc. Nasdaq: AKAM

Citrix Systems Inc. Nasdaq: CTXS

NXP Semiconductors NV Nasdaq: NXPI

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