Convertibles steady as equities sell off; volumes still low; Isis adds with stock on J&J deal

By Rebecca Melvin

New York, Jan. 5 – Convertibles were mostly unscathed on Monday despite sharp selling in equities; and several, larger convertible bond issues, which were beaten down late last year, were notably improved amid stronger buying interest, market sources said.

Volumes were still relatively light, however, and that made it difficult to determine exactly what the trends in convertibles currently are, a New York-based trader said.

“I would say things were stable given the equity selloff, and they ‘held in’ a little better than expected,” the trader said.

Twitter Inc.’s dual tranches of $1.9 billion convertibles, which priced Sept. 11, were said to have improved about 0.25 point on a dollar-neutral basis to about 87 to 87.25.

Red Hat Inc.’s $805 million of 0.25% convertibles, which priced Oct. 1, were better by 0.375 point, the trader said.

The same was true of other quasi-investment-grade names and cross-over names that were supported by outright interest, including Citrix Systems Inc. and Priceline Group Inc.

Isis Pharmaceuticals Inc.’s 1% convertible bonds traded up in line to slightly better on a dollar-neutral basis, with the company’s stock higher on Monday after news that the Carlsbad, Calif.-based developer of gene-based therapeutic drugs had entered into a deal with a unit of Johnson & Johnson to develop antisense drugs to treat autoimmune disorders of the gastrointestinal tract. Isis will receive $35 million in upfront payments.

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