EQT, Snap convertibles expand on debut in early trading; American Eagle, 2U struggle

By Abigail W. Adams

Portland, Me., April 24 – The convertibles primary market rounded out an active week with two upsized deals pricing after the market close on Thursday.

Snap Inc. sold an upsized $850 million of five-year convertible notes, and EQT Corp. priced an upsized $440 million of six-year convertible notes.

The new paper dominated activity in the secondary space on Friday with the two deals accounting for $400 million of the $800 million in reported volume by the late afternoon.

Both deals saw a large dollar-neutral expansion.

However, as Snap’s newly priced 0.25% convertible notes due 2025 were expanding, the company’s 0.75% convertible notes due 2026 were coming in.

While new paper remained in focus, not all of it was performing well.

American Eagle Outfitters, Inc.’s 3.75% convertible notes due 2025 were continuing to contract and 2U Inc.’s 2.25% convertible notes due 2025 were still languishing below par on Friday.

Snap expands

Snap priced an upsized $850 million of five-year convertible notes after the market close on Thursday at par with a coupon of 0.25% and an initial conversion premium of 35%.

Pricing came at the rich end of talk for a yield of 0.25% to 0.75% and at the midpoint of talk for an initial conversion premium of 32.5% to 37.5%.

The greenshoe was also upsized to $150 million.

The initial size of the deal was $750 million with a greenshoe of $112.5 million.

Snap’s new 0.25% notes dominated activity in the secondary space and were holding above par with stock off during Friday’s session.

The 0.25% notes due 2025 were trading in a tight range of 100.25 bid, 100.75 offered throughout the session, a source said.

They were expanded 1.25 points dollar-neutral, a market source said early in the session.

While Snap’s 0.25% notes were in focus and expanding on debut, the camera and social media company’s 0.75% notes due 2026 continued to come in, a source said.

The 0.75% notes dropped below par on Friday.

The notes were changing hands between 99.25 and 99.625 throughout the session and stood poised to close the day at 99.25.

“People are moving out of these,” the source said.

While the 0.75% notes have a higher coupon than Snap’s latest offering, it has a longer maturity and a higher conversion premium.

Snap stock traded to a low of $15.58 and a high of $16.22 before closing the day at $16.00, a decrease of 0.56%.

EQT trades up

EQT priced an upsized $440 million of six-year convertible notes after the market close on Thursday at par with a coupon of 1.75% and an initial conversion premium of 20%.

Pricing came at the rich end of talk for a coupon of 1.75% to 2.25% and at the midpoint of talk for an initial conversion premium of 17.5% to 22.5%.

The greenshoe was also upsized to $60 million.

The initial size of the deal was $350 million with a greenshoe of $52.5 million.

The notes skyrocketed on an outright and dollar-neutral basis, sources said.

The 1.75% notes traded up to 103.125 early in the session.

They continued to gain as the session progressed, reaching a 105-handle by the late afternoon.

The notes were bid up 2.75 points on swap early in the session, a source said.

EQT stock traded to a low of $12.39 and a high of $13.64 before closing the day at $13.39, an increase of 7.12%.

Struggling

While the deals to price after the market close on Thursday were performing well, some of the deals from earlier in the week continued to struggle.

American Eagle’s 3.75% convertible notes due 2025 dropped back below par on an outright basis and were continuing to contract dollar-neutral on Friday, a source said.

The 3.75% notes were changing hands at 98.25 early in the session. They were seen contracted 0.25 point in the late afternoon.

American Eagle stock traded to a low of $6.54 and a high of $7.05 before closing the day at $6.83, a decrease of 2.29%.

The clothing retailer was continuing to struggle as rumors circulate about industry peers J.C. Penney and Neiman Marcus filing for bankruptcy.

2U’s 2.25% convertible notes due 2025 also continued to languish below par.

The notes were changing hands at 98.875 late Friday afternoon.

2U stock traded to a low of $20.57 and a high of $22.33 before closing the day at $21.94, an increase of 3.93%.

Mentioned in this article:

2U Inc. Nasdaq: TWOU

American Eagle Outfitters, Inc. NYSE: AEO

EQT Corp. NYSE: EQT

Snap Inc. NYSE: SNAP

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