Spirit Airlines eyed; Snap hits aftermarket, trades up on debut; Enphase down outright

By Abigail W. Adams

Portland, Me., April 28 – New paper was in focus on Wednesday with the convertibles primary market returning to action after a more than one-week hiatus.

Spirit Airlines Inc. plans to price $440 million of five-year convertible notes after the market close on Wednesday.

The refinancing deal looked cheap based on underwriters’ assumptions and was optically attractive for the market’s current pricing, a source said.

Meanwhile, the first new paper in more than one week hit the secondary space.

Snap Inc. priced $1 billion of six-year convertible notes after the market close on Tuesday.

While many thought the days of 0% coupons that priced at par were a thing of the past, the social media darling was able to secure the attractive terms.

The new paper dominated activity in the secondary space and was trading up on an outright and dollar-neutral basis.

Outside of the new paper, it was a relatively quiet day in the secondary space with $461 million in reported volume about one hour before the market close.

However, the market continued to firm with buyers beginning to outnumber sellers.

Enphase Energy Inc.’s 0% convertible notes due 2028 returned to focus with the notes again trading off on an outright basis as stock tanked on the heels of the solar power systems provider’s earnings.

Spirit Airlines eyed

Spirit Airlines plans to price $440 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1% to 1.5% and an initial conversion premium of 37.5% to 42.5%.

The deal was heard to be in the market with assumptions of 425 basis points over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked 2.56 points cheap at the midpoint of talk.

The deal had optically attractive terms with a decent coupon given the current pricing in the market.

However, proceeds from the new offering will be used to repurchase for cash a portion of the Miramar, Fla.-based airline’s 4.75% convertible notes due 2025.

Spirit priced the 4.75% convertible notes in May 2020 as part of a wave of rescue financing as companies scrambled to raise liquidity at the height of the pandemic-induced economic shutdown.

Snap trades on debut

Snap priced $1 billion of six-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 47.5%, according to a company press release.

Pricing came at the rich end of talk for a coupon of 0% to 0.5% and the midpoint of talk for an initial conversion premium of 45% to 50%, according to a market source.

While pricing in the convertibles primary market was beginning to change with No-Nos, or 0% coupons that priced at par, more difficult to come by, the camera and social media company was able to secure the attractive terms.

The new paper was trading up on an outright and dollar-neutral basis on debut.

The notes were marked at 100.375 bid, 100.875 offered versus a stock price of $59.65.

They were seen up 0.75 point dollar-neutral in the mid-afternoon.

The notes continued to gain alongside stock heading into the afternoon.

The notes were marked at 102.125 bid, 102.375 offered versus a stock price of $61.80 heading into the market close, a source said.

Snap’s stock traded to a low of $57.86 and a high of $62.14 before closing the day at $62.04, an increase of 2.53%, shortly before the market close.

Concurrently with the new offering, the company entered into privately negotiated exchange agreements with holders of its 0.75% convertible notes due 2026 and 0.25% convertible notes due 2025 and will exchange $840 million in principal amount of the notes for 38.4 million shares.

The takeout of the old notes was heard to be about 1 point higher than the market value, a source said.

Enphase down outright

Enphase Energy’s 0% convertible notes due 2028 were again trading off on an outright basis as stock tanked following the company’s first-quarter earnings report.

The 0% convertible notes traded down 5.5 points outright with stock down more than 14%.

The notes were changing hands at 89.875 versus an equity price of $147 in the late afternoon.

The notes saw more than $12 million in reported volume.

Enphase Energy’s stock traded to a low of $144.55 and a high of $152.99 before closing the day at $146.91, a decrease of 14.14%.

While Enphase beat analyst expectations on both the top and bottom lines, stock traded off on weak guidance.

Enphase reported earnings per share of $0.56, which beat analyst expectations for earnings per share of $0.43.

Revenue of $301.75 million also topped estimates of revenue of $291.99 million.

However, the company reported weak second-quarter guidance for revenue of $300 million to $320 million, which missed analyst expectations.

The 0% convertible notes have largely traded below par since pricing in late February.

While the notes closed out the previous week at the 88, 89 level, they traded up on an outright basis heading into the company’s earnings.

The notes were changing hands on a 95-handle on Tuesday.

Mentioned in this article:

Enphase Energy Inc. Nasdaq: ENPH

Snap Inc. NYSE: SNAP

Spirit Airlines Inc. NYSE: SAVE

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