Baozun’s new converts hit the market, trade ‘all over the place’; Bilibili returns to par; Ensco improves

By Abigail W. Adams

Portland, Me., April 5 – The convertible secondary space’s week ended as it began – with the convertible notes of China-based corporations in focus.

New paper from Baozun Inc. hit the secondary space on Friday although trading activity surrounding the notes was lighter than expected.

The notes were trading “all over the place,” a market source said. While up on swap, they were coming in on an outright basis.

Bilibili Inc.’s newly priced 1.375% convertible notes due 2026 remained active in the secondary space with the notes returning to par after dropping below in the previous session.

Outside of the new paper, the secondary space was quiet on Friday with few notable movements, sources said.

Keeping with the light Friday volume, but after heavy trading during the previous session, Ensco plc’s 3% convertible notes due 2024 continued to improve on Friday, which was another strong day for crude oil futures.

All eyes will be on the primary in the coming week to see what the market will bring for new paper before the earnings season blackout officially sets in.

Baozun volatile

Baozun priced $225 million of five-year convertible notes after the market close on Thursday at par with a coupon of 1.625% and an initial conversion premium of 30%.

Pricing came at the midpoint of talk for a coupon of 1.375% to 1.875% and at the cheap end of talk for an initial conversion premium of 30% to 35%, according to a market source.

In connection with the offering, the Shanghai-based e-commerce service company entered into lending agreements and will lend a total of 4,230,776 American Depositary Shares to affiliates of the initial purchasers of the notes.

Baozun priced an initial 2,250,000 ADSs at $40 per ADS to establish the initial borrow facility.

The notes were trading “all over the place,” early in Friday’s session, a market source said.

The 1.625% notes were at par with stock unchanged early in the session. They were changing hands between 101.5 and 102.5 as stock climbed.

With the notes priced off of the $40 ADS offering, they were trading up about 0.5 point on swap shortly before 11 a.m. ET, a market source said.

However, for outright trades, the notes were contracting.

The notes were seen up 2 points on swap later in the afternoon, a market source said.

Baozun’s ADSs closed Friday at $42.85, an increase of 4.38%.

The discrepancy in trading levels was largely due to the borrow facility, sources said.

While the notes modeled cheap, the borrow facility complicated trading of the notes, limiting the amount that could trade on swap, a market source said.

The facility created “mixed markets,” for the notes, another source said.

However, the 1.625% notes were quiet alongside the broader convertibles market with trading activity much less than expected.

The deal was small and clubby, a market source said.

Bilibili back at par

Bilibili’s 1.375% convertible notes due 2025 remained active in the secondary space with the notes returning to par after falling far below during Thursday’s session.

The 1.375% notes rose to 100.125 by the late afternoon with stock rebounding from its lows, according to a market source.

More than $16 million of the bonds were on the tape by the late afternoon.

Bilibili’s ADSs traded as high as $18.05 and as low as $17.95 before closing the day at $18.02, an increase of 4.59%.

The 1.375% notes from the Shanghai-based online entertainment company dropped as low as 98.875 during Thursday’s session as the company’s equity fell more than 4.7%.

They had traded up to 102 on their market debut on Wednesday.

Ensco improves

Ensco’s 3% convertible notes due 2024 continued to improve on Friday although in lighter trading volume.

The notes were up about 0.5 point to 82.5 in the late afternoon with the yield now 7.3%.

While only $3 million of the bonds were on the tape by the late afternoon on Friday, the notes were major volume movers during Thursday’s session.

The notes climbed about 2 points on Thursday with more than $27 million of the bonds in play.

The notes have largely risen and fallen alongside crude oil futures.

Friday marked another strong day for crude oil with the barrel price of WTI crude oil for May delivery settling at $63.27, an increase of $1.17 or 1.88%.

Mentioned in this article:

Baozun Inc. Nasdaq: BZUN

Bilibili Inc. Nasdaq: BILI

Ensco plc NYSE: ESV

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