Morning Commentary: Convertible debt trading still weak; Herbalife falters as guidance altered

By Stephanie N. Rotondo

Seattle, June 5 – As convertible bond market activity was slowing, Herbalife Ltd.’s 2% convertible notes due 2019 came into focus.

The name was notable on Monday following the company announcement on Sunday that it had massively cut its revenue guidance.

However, it did up its earnings forecast.

One New York-based sellside source placed the notes around 103. Another market source echoed that level, deeming it off from previous levels around 105.

The underlying stock was getting hit as well, falling $4.57, or 6.18%, to $69.35.

Herbalife said its current quarter revenue would decline 2% to 6% due to its efforts surrounding its settlement with the Federal Trade Commission in July 2016.

The company had previously forecast a decline of 0.5% to 4.5%.

The settlement was in regards to accusations that the nutritional supplements distributor was a pyramid scheme. Herbalife agreed to pay $200 million to settle the claims and also agreed to implement new methods documenting its sales.

Still, total expected adjusted earnings for the quarter was increased to 95 cents to $1.15 per share. That compared to previous guidance of 88 cents to $1.08 per share.

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