Rivian convertible notes hit new low; Spirit Airlines jumps; Rocket Lab below par

By Abigail W. Adams

Portland, Me., April 15 – The convertibles primary market remained dormant on Monday after two consecutive weeks with no new issuance.

Sources were not optimistic about the prospects for new issuance throughout the week with earnings season kicking off and the downturn in markets.

Meanwhile, it was a quiet start to the week in the convertibles secondary space on Monday as equity markets attempted to rebound from the heavy selling of the previous session.

While firm early in the session, equity indexes saw heavy selling into the close as Treasury yields continued to climb on reduced rate cut expectations.

The Dow Jones industrial average closed Monday down 248 points, or 0.65%, the S&P 500 index closed down 1.2%, the Nasdaq Composite index closed down 1.79% and the Russell 2000 index closed down 1.37%.

There was $56 million in reported convertible bond trading volume about one hour into the session and $356 million on the tape about one hour before the market close.

While trading activity was thin, there were large price movements in the space both to the downside and upside.

Rivian Automotive Inc.’s convertible notes continued their downward spiral on Monday with both tranches hitting new outright lows amid heavy selling in stock.

Rocket Lab USA Inc.’s 4.25% convertible notes due 2029 also hit a new outright low on Monday with the notes dropping below par for the first time since pricing.

Spirit Airlines, Inc.’s 1% convertible notes due 2026 were the major gainers of the session with the notes soaring after the beleaguered airline provided an update on its financial outlook for the current quarter and year.

Southwest Airlines Co.’s 1.25% convertible notes due May 1, 2025 (Baa1/BBB) were also active with the notes higher alongside stock.

Rivian’s new low

Rivian’s convertible notes continued their downward spiral on Monday as stock slumped to a new 52-week low.

The 4.625% convertible notes due 2029 dropped 2 points outright with stock down about 7%.

The notes were trading at 66.875 versus a stock price of $8.38 in the late afternoon, according to a market source.

The yield was about 14.25%.

With $15 million in reported volume, the 4.625% convertible notes were the most actively traded issue of Monday’s session.

The more recently priced 3.625% convertible notes due 2030 dropped 2.25 points outright.

They were trading at 58.875 versus a stock price of $8.39 in the late afternoon.

The yield was about 13.25%.

Rivian’s stock traded to a high of $9.17 and a new 52-week low of $8.32 before closing at $8.40, a decrease of 8%.

While both tranches of convertible notes were in the money at the close of 2023, they have been on a downward spiral for the past few months amid heavy selling in the EV sector.

Troubles continue to brew for the sector with more signs of decreasing demand.

Ford’s announcement that it was slashing the price of its EV pickup truck sent Rivian’s stock to a new 52-week low.

Rocket Lab below par

Rocket Lab’s 4.25% convertible notes due 2029 sank below par on Monday for the first time since pricing in early February on a heavy day for the stock.

The 4.25% convertible notes were off 3.5 points outright as stock sank 5%.

The notes were trading at 96.5 versus a stock price of $3.53 in the late afternoon, according to a market source.

There was $8 million in reported volume.

Rocket Lab’s stock traded to a high of $3.78 and a new 52-week low of $3.51 before closing at $3.53, a decrease of 5.36%.

The 4.25% convertible notes priced at par on Feb. 1 and initially made strong gains on an outright and dollar-neutral basis.

However, they have given back all outright gains with stock trending lower over the past month.

Spirit soars

Spirit Airlines’ struggling 1% convertible notes due 2026 were the major gainers of Monday’s session with the notes shooting higher after the airline provided an updated financial outlook for the fiscal year.

The 1% notes gained almost 2 points outright to trade at 51.875 early in the session, according to a market source.

They continued to climb as the session progressed and were trading at 54.25 in the late afternoon.

The yield was 35.75% early and tightened to 33% heading into the market close.

There was $8 million in reported volume.

Spirit’s stock traded to a low of $4.24 and a high of $4.71 before closing at $4.45, an increase of 6.46%.

The convertible notes jumped after the beleaguered airline provided an investor update on its financial outlook for the current quarter and year.

While not official guidance, the information increased investor confidence in the airline whose survival has been questioned since the termination of the JetBlue merger.

Southwest Airlines’ 1.25% convertible notes due May 1, 2025 (Baa1/BBB) were also active with the notes gaining alongside stock.

The notes were up about 0.5 point outright to trade around par, according to a market source.

There was $9 million in reported volume.

Southwest’s stock traded to a low of $27.64 and a high of $28.19 before closing at $27.84, up 1.13%.

Mentioned in this article:

Rivian Automotive Inc. Nasdaq: RIVN

Rocket Lab USA Inc. Nasdaq: RKLB

Southwest Airlines Co. NYSE: LUV

Spirit Airlines, Inc. NYSE: SAVE

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