Spirit Airlines tanks, JetBlue soars on merger failure; DISH gains on exchange offer

By Abigail W. Adams

Portland, Me., Jan. 16 – While the convertible primary market was dormant on Tuesday, the secondary space had an active day with topical news moving the market on a red day for equities and Treasuries.

The Dow Jones industrial average closed Tuesday down 232 points, or 0.62%, the S&P 500 index closed down 0.37%, the Nasdaq Composite index closed down 0.19% and the Russell 2000 index closed down 1.21%.

There was $71 million in reported convertible bond trading volume about one hour into the session and $568 million on the tape about one hour before the market close.

The final determination in the antitrust trial over JetBlue Airways Corp.’s acquisition of Spirit Airlines, Inc. came midsession and sparked “monster moves” in their convertible notes, a source said.

JetBlue’s 0.5% convertible notes due 2026 soared while Spirit Airlines’ 1% convertible notes due 2026 crashed and burned after a federal judge blocked the merger.

DISH Network Corp.’s convertible notes (Caa2/CCC-) also had heavy volume with the notes improved after EchoStar Corp. launched an exchange offer for the full outstanding amounts of the notes.

Failed merger

JetBlue’s 0.5% convertible notes due 2026 and Spirit Airlines’ 1% convertible notes due 2026 moved in radically different trajectories after a federal judge blocked the merger of the discount airlines on antitrust concerns.

JetBlue’s 0.5% convertible notes due 2026 soared 7 points outright.

They were trading at 77 with a yield of 12.8% in the late afternoon, according to a market source.

There was $63 million in reported volume.

Spirit Airlines’ 1% convertible notes due 2026 crashed 25 points following the news.

They sank down to 40 with a yield of about 46.5% in the late afternoon, a source said.

There was $37 million in reported volume.

While neither of the convertible notes are equity-sensitive, JetBlue’s stock also climbed in response to the news while Spirit Airlines’ stock crashed.

JetBlue’s stock closed Tuesday at $5.13, an increase of 4.91%.

Spirit Airlines’ stock closed at $7.92, a decrease of 47.09%.

“There were some monster moves,” a source said, after the midsession announcement.

JetBlue’s and Spirit Airlines’ convertible notes and stock have been volatile as the antitrust trial seeking to block their merger took place.

While the convertible notes of both airlines had heavy selling in November when the antitrust trial commenced, they made a significant comeback in the market rally in December.

Spirit Airlines’ 1% convertible notes traded as high as 70 in late December and were changing hands on a 67-handle heading into Tuesday’s session.

The 1% notes traded in the mid-40s amid heavy selling in November.

DISH’s exchange

DISH’s convertible notes were once again in focus after EchoStar launched an exchange offer for the full outstanding amounts of the notes.

DISH’s 0% convertible notes due 2025 and 3.375% convertible notes due 2026 rallied on the news, which were considered a boon for the company’s convertible noteholders, a source said.

The 0% notes due 2025 were unchanged early in the session but gained about 1.5 points by market close.

The 0% notes were trading in the 67.5 to 68.5 context about one hour after the opening bell.

They traded at 69.75 by the market close.

There was $42 million in reported volume.

DISH’s 3.375% convertible notes gained 1.5 to 2 points on the news with the notes wrapped around 57 throughout the session.

There was $15 million in reported volume.

DISH’s 2.375% convertible notes due March 15, 2024 were also improved in relatively light volume with the notes not covered by the exchange offer.

The 2.375% notes continued to trade at 97.25 with a yield of about 19.5% early in the session.

They were wrapped around 98 with a yield of about 15.125% by the market close.

DISH announced late Friday that it was launching an exchange offer for the 2025 and 2026 convertible notes.

The company is offering to exchange the convertible notes for new EchoStar 10% senior secured notes due 2030.

The exchange consideration for the 0% convertible notes due 2025 is $610 and for the 3.375% convertible notes is $510, with both considerations based on $1,000-par notes, Prospect News reported.

EchoStar is securing the notes with the spectrum licenses involved in the highly controversial asset transfer that sparked a fire-sale in DISH DBS Corp.’s senior notes last week and raised the prospects of a legal battle with creditors.

In addition, EchoStar announced early Tuesday an exchange offer for four series of senior notes issued by DISH DBS.

The new 10% senior secured notes due 2030 and 10% senior secured notes due 2034 will be issued by EchoStar’s newly formed subsidiary DISH DBS LLC and secured by the assets attributed to the subsidiary, which include DISH TV subscribers.

The transfer of the wireless spectrum assets outside of the reach of DISH DBS creditors raised the ire of investors with the company seemingly leaving the debt and weaker assets of the company with DISH DBS’ side of the capital structure, sources said.

While the exchange offer for the convertible notes was received favorably, the exchange offer for DISH DBS’ straight debt was not with the company most likely headed towards litigation, a source said.

Mentioned in this article:

EchoStar Corp. Nasdaq: SATS

JetBlue Airways Corp. Nasdaq: JBLU

Spirit Airlines, Inc. NYSE: SAVE

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