PagerDuty on tap; Rivian convertibles remain volatile, improve on hedge; Seagate active

By Abigail W. Adams

Portland, Me., Oct. 9 – While it was a quiet session on Monday with the bond market closed for the Columbus Day/Indigenous Person’s Day holiday in the United States, the convertibles primary market was active with one deal launching post-close.

PagerDuty Inc. plans to price $350 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 27.5% to 32.5%.

J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and BofA Securities Inc. are bookrunners for the Rule 144A offering, which carries a greenshoe of $52.5 million.

Meanwhile, it was a quiet day in the secondary space with equity markets volatile amid another unforeseen geopolitical situation.

Equity indexes were in the red early Monday, as markets reacted to the military conflict between Israel and Hamas.

While the conflict sparked a surge in oil futures and stoked concerns about a more widespread regional and international conflict, equity indexes recovered from their early losses and closed the day strong.

The Dow Jones industrial average closed Monday up 197 points, or 0.59%, the S&P 500 index closed up 0.63%, the Nasdaq Composite index closed up 0.39% and the Russell 2000 index closed up 0.52%.

WTI Crude futures were trading at $86.33, an increase of 4.29%, at the close of equity markets.

The run up in crude oil futures, which blew past $90 in late September, are an inflationary headwind that has contributed to the market repricing for future rate hikes and a higher-for-longer rate environment, sources said.

However, few were making moves in the secondary space amid the volatility in broader markets with $43 million in reported convertibles trading volume about one hour into the session and $230 million on the tape about one hour before the market close.

Rivian Automotive Inc.’s new 3.625% convertible notes due 2030 were again the name of the day with the volatility seen on their market debut last Friday continuing with the notes seeing large outright swings.

However, the notes were slightly stronger on swap after contracting on their aftermarket debut.

High-grade names remained in focus with American Water Capital Corp.’s 3.625% exchangeable senior notes due 2026 (Baa1/A), Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) and CMS Energy Corp.’s 3.375% convertible notes due 2028 (Baa2) unchanged in active trade.

Seagate HDD Cayman’s 3.5% exchangeable notes due 2028 were also active although with little movement in price.

Rivian volatile

Rivian’s 3.625% convertible notes due 2030 remained volatile their second day in the secondary space with the notes ricocheting from below par early in the session to a new outright high.

The 3.625% notes were down 3 points outright early in the session with stock down more than 5%.

They fell back to a 98-handle and were changing hands at 98.125 versus a stock price of $17.90 shortly before 11 a.m. ET, according to a market source.

However, the notes popped back above par as stock recovered alongside the broader market.

The notes were trading at 101.25 versus a stock price of $18.59 in the late afternoon.

The notes were stronger on hedge and pared their dollar-neutral losses from their aftermarket debut, a source said.

There was $27 million in reported volume.

Rivian’s stock traded to a low of $17.79 and a high of $18.97 before closing at $18.78, an increase of 0.74%.

Rivian’s 3.625% convertible notes were volatile on their market debut last Friday with the notes ricocheting from 96 to 101 in a single session.

However, they were holding well on hedge with the notes contracting only about 0.25 point to 0.5 point dollar-neutral.

The $1.5 billion issue, which priced at par on Oct. 5, was placed largely with hedge accounts, which accounted for about 70% of the allocation, a source said.

High-grade trades

Outside of Rivian, trading activity on Monday remained concentrated in high-grade names with American Water’s 3.625% exchangeable senior notes due 2026, Southern Co.’s 3.875% convertible notes due 2025 and CMS Energy’s 3.375% convertible notes due 2028 seeing the heaviest volume.

However, the notes were little changed in the activity.

American Water’s 3.625% notes were trading at 96.375 versus a stock price of $119.13 in the late afternoon, according to a market source.

There was $18 million in reported volume.

American Water’s stock traded to a low of $118.47 and a high of $120.82 before closing at $120.80, an increase of 1.64%.

CMS Energy’s 3.375% convertible notes due 2028 were trading at 93.875 versus a stock price of $52.76.

There was $12 million in reported volume.

CMS’ stock traded to a low of $52.57 and a high of $53.45 before closing at $53.35, up 0.58%.

Southern Co.’s 3.875% convertible notes due 2025 were trading at 97.625 versus a stock price of $65.41, according to a market source.

There was $10 million in reported volume.

Southern Co.’s stock traded to a low of $64.88 and a high of $65.93 before closing at $65.91, an increase of 1.45%.

The notes were each trading with a yield of about 5%, a source said.

Seagate active

Seagate’s 3.5% exchangeable notes due 2028 were active although largely unchanged during Monday’s session.

The 3.5% notes were trading at 103.5 versus a stock price of $66.01 in the late afternoon, according to a market source.

There was $9 million in reported volume.

Seagate’s stock traded to a low of $65.38 and a high of $66.58 before closing at $66.23, up 0.27%.

The 3.5% notes have performed well since the $1.3 billion issue priced at par on Sept. 8 with the notes up on an outright and dollar-neutral basis.

Mentioned in this article:

American Water Works Co., Inc. NYSE: AWK

CMS Energy Corp. NYSE: CMS

PagerDuty, Inc. Nasdaq: PD

Rivian Automotive Inc. Nasdaq: RIVN

Seagate Technology Holdings plc Nasdaq: STX

Southern Co. NYSE: SO

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