Convertibles primary market quiet; Southwest Airlines eyed; cruise lines down outright

By Abigail W. Adams

Portland, Me., Aug. 3 – The convertibles primary remained silent on Monday with no deals announced.

There are new deals in the pipeline, sources said. The question is when they will launch.

Sources expect some new paper in the coming week.

The previous week was the first week no new deals priced since the primary market reopened in April.

Meanwhile, the secondary space saw a sleepy start to the month with volume light.

“It’s quiet, but that’s to be expected on a summer Monday,” a source said.

There was $48 million on the tape about one hour into Monday’s session and $565 million in reported volume at the market close.

Investment-grade convertibles topped the volume charts early in the session.

Euronet Worldwide Inc.’s 0.75% convertible notes due 2049 and Ares Capital Corp.’s 4.625% convertible notes due 2024 had some large trades on the tape soon after the opening bell.

However, there was no sustained activity in the names.

Southwest Airlines Co.’s 1.25% convertible notes due 2025 were major volume movers on Monday with the notes posting gains alongside stock.

While the airline industry launched the week on a positive note with the equity of several companies on the rise, Monday was another tough day for cruise lines.

The equity of several cruise ship operators sold off following news reports of a Covid-19 outbreak aboard one of the first cruise ships to resume operations.

Carnival Corp.’s 5.75% convertible notes due 2023 and Norwegian Cruise Line Holdings Ltd.’s 6% exchangeable notes due 2024 were both trading down alongside stock.

High-grade notes active

Euronet Worldwide’s 0.75% convertible notes due 2049 were changing hands around 97.375 early in the session with two large $2 million plus prints on the tape, a source said.

While the bonds saw some odd lot trades as low as 96 later in the afternoon, the 97.375 prints were more reflective of the notes’ real level, a source said.

Euronet Worldwide stock closed Monday at $97.24, an increase of 1.14%.

Ares Capital’s 4.625% convertible notes due 2024 also saw a large-volume trade early in the session.

The 4.625% notes changed hands at 101.875 in a single trade of about $3.5 million bonds, a source said.

Ares’ stock closed Monday at $14.43, an increase of 2.34%.

However, neither Euronet’s nor Ares’ convertible notes are equity sensitive.

While the investment-grade convertible notes saw large prints early Monday, activity in the names was not sustained with the notes going quiet into the afternoon.

Southwest in focus

Southwest Airlines’ 1.25% convertible notes due 2025 topped the volume charts on Monday with the notes posting gains alongside stock.

The 1.25% notes were up almost 3 points outright to 118.75 with stock up 2%.

There was more than $31 million of bonds on the tape by the late afternoon, making them one of the most actively traded issues during Monday’s session.

Southwest Airlines’ stock traded to a high of $32.15 and a low of $30.30 before closing the day at $31.58, an increase of 2.2%.

Cruise lines down

Carnival’s 5.75% convertible notes due 2023 and Norwegian’s 6% exchangeable notes due 2024 were both down outright as stock sold off on a tough day for cruise lines.

Carnival’s 5.75% convertible notes dropped 9 points outright with stock off more than 5%.

The 5.75% notes traded down to 139 in the late afternoon.

However, volume in the large, liquid issue was light with $5 million on the tape heading into the market close.

Carnival stock traded to a high of $13.54 and a low of $12.83 before closing the day at $13.07, a decrease of 5.84%.

Norwegian’s 6% exchangeable notes due 2024 were also down more than 5 points outright with stock off more than 4%.

The 6% notes traded down to 112.75 in the late afternoon with about $8 million in reported volume, according to a market source.

The company’s recently priced 5.375% exchangeable notes were not active on Monday.

They closed out last week on a 93-handle, according to Trace data.

Norwegian stock traded to a high of $13.38 and a low of $12.56 before closing the day at $13.06, a decrease of 4.25%.

Norwegian stock has traded off since late last week when the company announced it would suspend operations until November.

The cruise industry in general was under pressure on Monday after news broke over the weekend that one of the first cruise lines to resume operations had a Covid-19 outbreak aboard one of its ships.

A Norwegian cruise ship owned by the company Hurtigruten reported that at least 41 passengers and crew members have tested positive for Covid-19.

Mentioned in this article:

Ares Capital Corp. Nasdaq: ARCC

Carnival Corp. NYSE: CCL

Euronet Worldwide Inc. Nasdaq: EEFT

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH

Southwest Airlines Co. NYSE: LUV

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.