Veeco on tap; Sea convertibles hold as stock tanks; DISH lifted; Southern Co. weakens

By Abigail W. Adams

Portland, Me., May 16 – The convertibles primary market was back in action on Tuesday with one overnight deal on deck.

Veeco Instruments Inc. plans to price $200 million of six-year convertible notes after the market close on Tuesday with books well oversubscribed.

Meanwhile, it was a quiet day in the convertibles secondary space as market players awaited new issuance.

Equity indexes saw a soft open, turned mixed as the session progressed but again fell into negative territory with all eyes on U.S. debt ceiling negotiations.

The Dow Jones industrial average closed Tuesday down 336 points, or 1.01%, the S&P 500 index closed down 0.64%, the Nasdaq Composite index closed down 0.18% and the Russell 2000 index closed down 1.44%.

There was $92 million in reported convertibles trading volume about one hour into the session and $438 million on the tape about one hour before the market close.

Investment-grade issues continued to dominate the tape with Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) weaker in heavy volume on the heels of a straight debt offering.

Earnings-related news continued to spark activity in outstanding issues with Sea Ltd.’s convertible notes active as its equity tanked double digits.

While Sea’s equity was under pressure, its convertible notes were holding up well, a source said.

DISH Network Corp.’s convertible notes improved on news of insider stock buying.

Veeco oversubscribed

Veeco plans to price $200 million of six-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.5% to 3% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 475 basis points over SOFR and a 38% vol.

The refinancing deal was “small and clubby,” a source said.

The deal was heard to be well oversubscribed with books closing at 5:30 p.m. ET.

The deal is coming as a refinancing.

The company intends to exchange a portion of its 3.5% convertible notes due 2025 and/or 3.75% convertible notes due 2027 for cash, shares or a combination of both in privately negotiated transactions.

Southern Co. weaker

Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) were weaker in heavy volume on Tuesday after the utility company priced a straight debt offering.

The 3.875% notes fell about 1 point outright.

They started the day trading just shy of 102.5 but fell to 101.625 by the late afternoon, a source said.

There was $15 million in reported volume.

Southern Co.’s stock traded to a low of $70.54 and a high of $72.54 before closing at $70.90, down 2.10%.

The notes were weaker after Southern Co. priced a $1.5 billion two-tranche offering of five-year and 10-year notes on Monday, a source said.

The deal included a $750 million tranche of 4.85% senior notes due 2028 that priced at 99.848 to yield 4.883%.

The deal also included a $750 million tranche of 5.2% senior notes due 2033 that priced at 99.824 to yield 5.222%.

Sea holds

Sea’s convertible notes were holding up well in active trade as equity tanked double digits on the heels of an earnings miss.

The 0.25% convertible notes due 2026 were unchanged on an outright basis.

The notes continued to trade on an 80-handle.

They were seen changing hands at 80.625 early in the session and 80.5 in the late afternoon, according to a market source.

There was $22 million in reported volume.

Sea’s 2.375% convertible notes due 2025 plunged outright but were holding on hedge.

The 2.375% notes sank 12 points outright.

They were seen at 111 in the late afternoon.

Sea’s American Depositary Shares traded to a low of $70.77 and a high of $79.57 before closing at $72.45, a decrease of 17.74%.

Sea’s equity sank after the Singapore-based tech conglomerate reported a large earnings miss.

While revenue of $3.04 billion was in line with expectations, the company reported earnings per share of 45 cents versus analyst expectations for earnings of 73 cents.

DISH lifted

DISH’s convertible notes were lifted on Tuesday on news of insider stock purchases.

The soon-to-mature 2.375% convertible notes due March 15, 2024 saw a flurry of activity early in the session as stock surged.

However, activity tempered as stock gave back its early gains and closed in the red.

The 2.375% notes added about 1.25 points outright to trade up to 85.25 with a yield of 23% on Tuesday, according to a market source.

There was $6 million in reported volume.

DISH’s stock traded to a high of $7.01 and a low of $6.47 before closing at $6.48, down 1.37%.

Stock made strong initial gains on Tuesday following reports that director James DeFranco had purchased 3 million shares of the company.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

Sea Ltd. NYSE: SE

Southern Co. NYSE: SO

Veeco Instruments Inc. Nasdaq: VECO

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