High-grade convertible notes in focus; PPL improves; Pinduoduo lower; DISH sees selling

By Abigail W. Adams

Portland, Me., March 20 – The convertibles primary market was quiet on Monday but is not expected to remain so for long.

There were a few deals in the pipeline that are set to launch before the week comes to a close, a source said.

Meanwhile, it was a quiet day in the convertibles secondary space as markets digested the latest developments in the banking sector while awaiting the Federal Open Market Committee’s rate decision on Wednesday.

Investors were eyeing UBS’s emergency buyout of Credit Suisse and questioning the deal’s ability to stymie further contagion in the banking sector, especially as First Republic Bank’s stock plummeted to a new 52-week low.

Equity markets opened Monday mixed but were lifted into positive territory as the session progressed.

The Dow Jones industrial average closed Monday up 383 points, or 1.2%, the S&P 500 index closed up 0.89%, the Nasdaq Composite index closed up 0.39% and the Russell 2000 index closed up 1.11%.

The convertibles secondary space was quiet with $57 million in reported volume about one hour into the session and $387 million on the tape about one hour before the market close.

While quiet, the market tone was significantly improved, a source said.

Investment-grade convertible notes continued to drive trading volume with IG issues accounting for more than one-third of the total volume in the space.

Recent IG issuance from Alliant Energy Corp. and PPL Capital Funding Inc. continued to improve in heavy volume.

Western Digital Corp.’s soon-to-mature 1.5% convertible notes due Feb. 1, 2024 (Baa3) and Expedia Inc.’s 0% convertibles due 2026 (Baa3/BBB-/BBB-) also saw heavy volume.

Pinduoduo Inc.’s 0% convertible notes due 2025 were lower in heavy volume as its equity fell double digits following earnings.

Losses continued to mount for DISH Network Corp.’s convertible notes (B3/CCC) with large sellers in the market as the company struggles to address and recover from a ransomware attack.

IG in focus

Investment-grade convertible notes populated the tape on Monday with the issues remaining liquid while activity in the broader market slowed.

PPL’s 2.875% convertible notes due 2028 (Baa1/BBB+) gained strength with the notes returning to a 98-handle.

The 2.875% notes opened the day wrapped around 97.875.

They climbed to trade at 98.625 versus a stock price of $27.31 in the late afternoon.

There was $25 million in reported volume.

PPL’s stock traded to a low of $26.87 and a high of $27.41 before closing at $27.27, an increase of 1.6%.

Alliant Energy’s 3.875% convertible notes due 2026 (BBB+) broke above a 101-handle.

They traded up to 102.25 versus a stock price of $53.55 in the late afternoon, according to a market source.

There was $21 million in reported volume.

Alliant’s stock traded to a low of $53.12 and a high of $53.92 before closing at $53.76, up 1.11%.

The 3.875% notes saw a rocky start in the aftermarket but have been on a strong uptrend since the previous week.

Western Digital’s soon-to-mature 1.5% convertible notes due Feb. 1, 2024 (Baa3) also saw heavy volume with large trades early in the session.

The 1.5% notes were seen at 96.375 with a yield 5.89%, according to a market source.

There was $11 million in reported volume with four trades on the tape.

The 1.5% notes have long been a yield play with the yield on the notes more attractive due to the rate rally over the past two weeks, a source said.

Expedia’s 0% convertible notes due 2026 were also active after a credit rating upgrade the previous week.

The 0% notes were trading in the 87.5 to 87.75 context in heavy volume.

There was $10 million in reported volume.

Expedia’s stock traded to a low of $93.33 and a high of $94.85 before closing at $94.56, an increase of 1.22%.

S&P Global Ratings boosted Expedia’s unsecured debt to BBB from BBB- the previous week due to a “robust recover in revenue and EBITDA” and the expectation that EBITDA will continue to increase.

Pinduoduo’s earnings

Pinduoduo’s 0% convertible notes due 2025 were lower in heavy volume on Monday as disappointing earnings sank the company’s equity by double digits.

The 0% notes were off about 0.25 to 0.5 point outright with equity down 14%.

The notes were changing hands at 94.75 with the yield 7.95% in early trading, according to a market source.

They were seen just north of 94.875 with the yield 7.713% in the late afternoon.

The notes are largely a yield play with a put date of Dec. 1, 2023.

While they mostly trade outright, the notes were down about 0.75 point dollar-neutral, a source said.

There was $13 million in reported volume.

The notes have traded on a 95-handle for the past month as their put date draws close.

The notes were active as Pinduoduo’s American Depositary Shares sank after disappointing earnings.

The Shanghai-based e-commerce company’s ADSs traded to a low of $75.01 and a high of $82.84 before closing the day at $78.91, a decrease of 14.17%.

DISH for sale

DISH’s convertible notes continued to fall on an outright and dollar-neutral basis with heavy selling in the name as the company struggles to recover from its recent ransomware attack.

The 0% convertible notes due 2025 traded to an all-time low of 57 on Monday.

They were changing hands at 57.25 versus a stock price of $8.98 in the late afternoon.

The yield was 21.51%.

There was $11 million in reported volume.

The 3.375% convertible notes also sank to a new low of 52.25, a source said.

The notes were trading on a 58-handle but a large seller last Friday drove the notes down to 53.75 bid, 54 offered, a source said.

DISH’s stock traded to a low of $8.86 and a high of $9.35 before closing at $8.99, off 1.21%.

Mentioned in this article:

Alliant Energy Corp. Nasdaq: LNT

DISH Network Corp. Nasdaq: DISH

Expedia Inc. Nasdaq: EXPE

Pinduoduo Inc. Nasdaq: PDD

PPL Capital Funding Inc. NYSE: PPL

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