DISH convertibles gain in heavy volume as straight debt destroyed; Uber gains outright

By Abigail W. Adams

Portland, Me., Jan. 10 – The convertibles primary market remained quiet on Wednesday with the lack of new deal announcements a disappointment to some.

However, the Thursday release of the Consumer Price Index report and the launch of earnings season were bound to put a damper on dealmaking with the real floodgates expected to open as issuers come out of their blackouts.

Equity markets were strong and Treasuries largely flat on Wednesday with all eyes on the latest piece of inflationary data as markets attempt to project rate cuts.

The Dow Jones industrial average closed Wednesday up 171 points, or 0.45%, the S&P 500 index closed up 0.57%, the Nasdaq Composite index closed up 0.75% and the Russell 2000 index closed up 0.11%.

While broader markets were in a holding pattern ahead of the CPI print, topical news sparked an active day in the secondary space.

There was $132 million in reported convertible bond trading volume about one hour into the session and $556 million in the early afternoon with activity heavily concentrated in a single name – DISH Network Corp.

DISH’s convertible notes (Caa2/CCC-) were in focus after the company announced a shuffling of assets with the company’s unencumbered wireless spectrum licenses transferred from DISH Network to a newly formed subsidiary.

While the news tanked DISH’s straight debt with the company’s senior notes plunging 8 to 10 points, DISH’s convertible notes made large gains on the news.

Uber Technologies Inc.’s 0.875% convertible notes due 2028 were active with the notes rising alongside stock.

DISH convertibles boosted

DISH was the name of the day in the convertibles secondary space with its notes boosted as its straight debt tanked following a reshuffling of assets after its merger with EchoStar.

DISH announced it was transferring encumbered wireless spectrum licenses to the newly formed subsidiary EchoStar Wireless Holding LLC.

DISH’s 0% convertible notes due 2025 gained 5 to 7 points on the news. They traded up to 65 early in the session, sources said.

They continued to rise and were seen changing hands at 67.125 in the late afternoon.

The yield narrowed to 21.875%.

There was $63 million in reported volume.

The 3.375% convertible notes due 2026 rose 3 to 4 points.

They were changing hands at 53 with a yield of 31% in early trade.

They continued to rise with the notes wrapped around 54 with a yield of 30¼% in the late afternoon, according to a market source.

There was $35 million in reported volume.

DISH’s soon-to-mature 2.375% convertible notes due March 15, 2024 were largely unchanged with the market seeing little doubt that they will be paid off upon maturity.

The 2.375% notes continued to trade at 98.75 with the yield about 9.5%.

There was $10 million in reported volume.

While the convertible notes are not equity sensitive, EchoStar Corp.’s stock skyrocketed on Wednesday, closing the day at $16.65, an increase of 31.52%.

DISH’s convertible notes became convertible into EchoStar’s stock following the completion of the DISH/EchoStar merger on Jan. 2.

DISH’s asset reshuffle also involved moving an intercompany loan from DISH DBS to a newly formed subsidiary.

While DISH’s convertible notes made large gains following the news, its straight debt issued by DISH DBS tanked.

The convertible notes are part of the capital structure that includes the newly created EchoStar subsidiary.

However, DISH’s senior notes were down 8 to 10 points following the reshuffle with the move pulling assets away from DISH DBS.

DISH seemed to be dividing its assets post-merger so the company’s bad debt rested in the weaker company, a source said.

Uber rises

Uber’s 0.875% convertible notes due 2028 were active on Wednesday with the notes on the rise alongside stock.

The 0.875% convertible notes added about 1.5 points outright with stock up a little more than 3%.

They were trading at 109.25 in the late afternoon.

There was $17 million in reported volume.

Uber’s stock traded to a low of $60.28 and a high of $62.61 before closing at $62.41, an increase of 3.5%.

Mentioned in this article:

EchoStar Corp. Nasdaq: SATS

Uber Technologies Inc. NYSE: UBER

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