DryShips convertibles drop after straight deal pulled; SunEdison, Citrix contract on hedge

By Rebecca Melvin

New York, Oct. 14 – More turbulence hit the convertibles market on Tuesday with DryShips Inc.’s 5% convertibles due Dec. 1 dropping hard in active trade after the Athens-based drybulk and tanker shipping company said it has withdrawn its $700 million offering of three-year senior secured notes and will look instead to a $350 million bridge facility to help fund the maturity of the 5% convertibles.

DryShips’ convertibles fell several points to 89, which was down from as much as 100 last week.

That situation combined with others like GT Advanced Technologies Inc.’s bankruptcy filing last week, which took the company’s shares to essentially $0 from about $13.00 overnight, has contributed to a lot of pain and anxiety in the convertibles market recently, sources said.

The GT Advanced 3% convertibles due 2017 traded at 21 on Tuesday, which was down from more than par before the filing.

Nevertheless, a bit of stability seemed to return to the market on Tuesday even though low liquidity, which resulted from the recent upheavals, was still in effect, a New York-based convertibles sellside source said.

Back in convertibles Tuesday, the SunEdison Inc. convertibles were lower, contracting on a dollar-neutral, or hedged, basis by about 0.5 point, a New York-based trader said.

Citrix Systems Inc.’s 0.5% convertibles were also down in active trade, contracting by about 0.625 point, the trader said. And fellow cloud-computing company, Salesforce.com Inc. saw its convertibles slip mostly in line with lower shares.

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