Aceto flat to lower outright, adds on swap; SunEdison extends slide; Horizon Pharma drops

By Rebecca Melvin

New York, Nov. 11 – Aceto Corp.’s newly priced 2% convertibles slipped below par on an outright basis but were better on swap in active trade on their debut in the secondary market on Wednesday.

The new bonds were weighed down by the underlying common shares of the Port Washington, N.Y.-based pharmaceutical ingredients company, which traded lower but pared losses by the market close.

The new bonds ended the session “hovering around par,” which represented a swap gain of about 0.5 point, a New York-based trader said.

The new deal breathed some life into what was likely to have been a dull session given that U.S. bond markets were closed in observance of the Veterans Day holiday.

“People came in to trade the bond,” a second trader said of the new Aceto convertible.

Overall, the convertibles market was weak, however, with outsized losses in SunEdison Inc. and Horizon Pharma plc.

The SunEdison 3.375% convertibles due 2025 slid into the upper 30s, changing hands at 37.6, which was down from 43 on Tuesday.

The SunEdison 2% convertibles fell to 61 from about 66, and the SunEdison 0.25% convertibles due 2020 were seen down another few points at 43.9.

SunEdison shares careened lower by another 15% on the heels of a 22% plunge on Tuesday, and they were below $5.00 per share compared to their 52-week high of $33.45.

Nvidia Corp. remained another active name. The Nvidia 1% convertibles due 2018 looked to have recouped a little bit amid weaker shares and traded at 155.8 after having dropped more than 4 points on Tuesday following a big run up in previous sessions. On Nov. 3, the Nvidia bonds traded at 144.25.

New Aceto adds on swap

Aceto’s newly priced 2% convertibles due 2020 ended the session around par after slipping on an outright basis below 100 in tandem with lower underlying shares. The bonds were steady on a swap basis, however, adding about 0.5 point, a trader said.

Aceto shares ended down 36 cents, or 1.4%, to $25.19 on Wednesday.

The bonds traded up 0.5 point on the day. They moved around on a dollar basis but were steady on swap, the trader said.

It was “pretty active, for a small deal,” he said, and given that “sentiment in converts was pretty weak, it outperformed on a sentiment basis.”

The Aceto 2% convertibles due 2020 changed hands late in the morning at 99.4, according to Trace data. The stock was down about 70 cents, or 2.7%, at $24.85 at the time.

Aceto priced $125 million of the five-year notes at the midpoint of talk late Tuesday, and the bonds were at the top of the Trace volume chart on Wednesday. Nearly half of the deal had turned over, or $59 million of bonds, by late morning.

On Tuesday, the Aceto bonds were seen at positive 0.125 point to 1.125 points in the gray market, although the five-year notes valued at about 103.7, using a credit spread of 475 basis points over Libor and 35% vol. at the midpoint of price talk, which is where they priced, in fact.

SunEdison drops further

SunEdison’s 2% convertibles due 2018, or the A tranche, traded down to 61 on Wednesday from 66 on Tuesday and from about 77 on Monday.

The SunEdison E and F tranches, which priced in May, traded down into the upper 30s from about 43.

The SunEdison C and D tranches were at 46, a trader said.

Shares of the St. Peters, Mo.-based solar technology company closed down another 87 cents, or 15%, to $4.90 on the heels of a $1.63, or 22% drop on Tuesday.

SunEdison’s complex of convertible bonds were down 3 points on swap across the board on Tuesday after the solar technology company reported a wider-than-expected loss for its third quarter and unveiled some of the large expenses facing the debt-strapped company.

Horizon Pharma drops again

Horizon Pharma’s 2.5% convertibles due 2022 were down about 10.5 points to 92.25 on Wednesday. Shares fell nearly 20% to $18.00.

They came in on a swap basis by about a point, a trader said. But they were still better on swap for the week so far, he said.

Horizon Pharma’s convertibles, which have swung dramatically in recent weeks, recently retracing more than 10 points of downside and a big chunk of a relative value loss. But on Wednesday they were down again amid more negative headlines regarding its pharmacy network.

Pharmacy benefits company Express Scripts said it was removing a specialty pharmacy that distributes Horizon’s drugs. Express Scripts is also suing Horizon for about $140 million for allegedly failing to fulfill some elements of its pharmacy network agreement.

For its part, Horizon said it will re-evaluate its relationship with the Express Scripts specialty pharmacy, which accounts for a large chunk of Horizon’s revenue.

“There were renewed headlines with Express Scripts,” a trader said, adding that the management of both companies were sparing at each other.

Mentioned in this article:

Aceto Corp. Nasdaq: ACET

Horizon Pharma plc Nasdaq: HZNP

Nvidia Corp. Nasdaq: NVDA

SunEdison Inc. Nasdaq: SUNE

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