High-grade convertible bonds active; American Water up; Liberty Broadband improves

By Cristal Cody

Tupelo, Miss., July 21 – Investment-grade convertible bonds continued to attract secondary interest in Friday’s session.

“Seven out of the top 10 bonds that traded yesterday were all investment-grade paper,” a source said. “A lot of times, investment-grade paper is cash alternative paper.”

American Water Capital Corp.’s 3.625% exchangeable senior notes due 2026 (Baa1/A) rallied more than 0.5 point on Friday in the most active convertible name traded after going out Thursday under 1 point better.

The bonds were moving on more than $27 million of volume in a session that saw $430 million of convertible notes traded with activity picking up from morning levels.

Secondary volume in the convertibles space was only $17 million as trading first got underway but had totaled $77 million by late morning, according to a market source.

“It’s Friday during the summer,” the source noted.

Stocks were mixed over the session while the Fear Factor index retreated.

The S&P 500 index rose 0.03% by the close, and the Dow Jones industrial average eked out a 0.01% gain. The Nasdaq closed down 0.22% and the Russell 2000 index dropped 0.35%.

The CBOE Volatility index retreated 2.79% to 13.60.

In other secondary trading on Friday, Liberty Broadband Corp.’s equity-sensitive 3.125% senior debentures due 2053 edged up in active supply.

Liberty Media Corp.’s paper has been active since the company announced on Thursday an adjustment to its media component of the securities basket underlying its 1.375% cash convertible senior notes due 2023.

Liberty Media’s notes convertible into shares of Sirius XM Holdings Inc. also had rallied on Thursday after the gain in Sirius’ equity but moved lower on Friday.

“The stock shot through the roof yesterday,” a source said.

Liberty Media’s 3.75% convertible senior notes due 2028 fell about 1 point on Friday after Sirius shares gave back the prior day’s gains.

American Water up

American Water Capital Corp.’s 3.625% exchangeable senior notes due 2026 (Baa1/A) traded Friday up 0.62 point at 102.56 and a yield of 2.69%, a source reported.

Secondary market volume topped $27 million.

The equity was priced at $148.77.

Shares in subsidiary American Water Works Co., Inc. closed the day up 1.28% at $148.82.

On Thursday, the bonds went out less than 1 point better at 101.94.

American Water Capital sold $900 million of the notes on June 27 with the paper being exchangeable into American Water’s common stock.

Liberty Broadband up

Liberty Broadband’s 3.125% senior debentures due 2053 went out modestly higher, up 0.14 point at 100.928 and a yield of 2.76%, in active trading totaling $9 million on Friday, a source said.

The equity was priced at $396.52.

Over the morning, the bonds rose 0.12 point to 100.904 with a 2.77% yield on $8 million of trading, while the equity was seen at $395.19.

Liberty Broadband sold $1 billion of the bonds on Feb. 22, and the issue is exchangeable into Charter Communications, Inc. class A common stock.

The Englewood, Colo.-based company owns interests in communications businesses, including Charter and its Alaska subsidiary GCI.

Liberty Broadband’s shares reversed softness over the morning and finished up 0.22% on Friday at $87.60.

Shares were down 0.07% late morning at $87.35.

Charter’s stock dropped 0.25% on the day to $394.47.

Liberty Media declines

Also Friday, Liberty Media’s 3.75% convertible senior notes due 2028 were down about 1 point at 112.125 in thin trading, a source said.

Liberty Media sold $500 million of the notes on March 8. The notes are convertible into Liberty’s series A Liberty SiriusXM common stock.

The 2.75% convertible senior notes due 2049 were not active during the session after going out Thursday up 2.5 points at 95.5 on $13 million of volume.

The bonds are equity sensitive since they convert into Sirius XM’s common equity.

Sirius XM’s shares climbed to $7.81 on Thursday on 127 million shares traded, up from $5.49 on Wednesday when 30 million shares changed hands.

The stock closed a week ago at $4.75.

Early Friday, Sirius XM’s shares dropped 10.59% to $6.99 on 49 million shares traded.

Sirius’ stock closed the day down 9.35% at $7.08 on 132 million shares traded, compared to the typical 19 million volume average.

Shares in Liberty Media, an Englewood, Colo.-based media, communications and entertainment company now known as Qurate Retail, Inc., closed up 1.98% at $1.03.

Mentioned in this article:

American Water Works Co., Inc. NYSE: AWK

Charter Communications, Inc. Nasdaq: CHTR

Liberty Broadband Nasdaq: LBRDA

Qurate Retail, Inc. Nasdaq: QRTEA

Sirius XM Holdings Nasdaq: SIRI

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