Convertibles: ‘Bleeding has slowed’; new Red Hat expands unexpectedly; Starwood on tap

By Rebecca Melvin

New York, Oct. 2 – Convertibles flattened out on Thursday after evidence that the hemorrhaging was beginning to stop late Wednesday, a New York-based trader said.

“Maybe going out last night, it felt like the speed with which things were ‘coming in’ was starting to draw attention. It reached levels where the amount of pain was attracting vulture bids,” the trader said.

On Thursday names that had dropped sharply were trading flat, or in line, with their underlying shares, including Citrix Systems Inc., AOL Inc., Twitter Inc. and Tesla Motors Inc. Those names held at decent levels, he said.

“It flattened out today; there were not a lot of people looking to trade, but it was a better day all around,” the trader said.

Red Hat Inc.’s newly priced 0.25% convertibles traded a little above par and better on a hedged basis after the Raleigh, N.C.-based software company priced $700 million of the five-year notes at the cheap end of coupon talk and beyond the cheap end of premium talk.

On Wednesday, the deal traded in the gray market ahead of final terms being fixed around issue price.

Also in the primary market, Starwood Property Trust, Inc. launched a registered offering of $500 million of three- and five-year convertible senior notes.

Starwood’s existing 4% convertibles due 2019 traded at 106.1, according to Trace data.

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