BrightSpring equity units tank with IPO; JetBlue notes gain, Spirit Airlines falls

By Abigail W. Adams

Portland, Me., Jan. 26 – The convertibles primary market cleared the calendar with BrightSpring Health Services Inc.’s $400 million offering of $50-par three-year tangible equity units pricing post-close on Thursday alongside a disappointing IPO.

The offering played to tepid demand with the units pricing cheap and the IPO coming well below the low end of the range.

The units and stock saw heavy selling on their trading debut with both plunging deep underwater.

While the BrightSpring carnage dominated the market’s attention, the secondary space was otherwise quiet on a muted day for equities.

Equity indexes were either side of unchanged on the heels of the latest Personal Consumption Expenditure report coming in line with expectations with inflationary pressures continuing to cool.

The Dow Jones industrial average closed Friday up 60 points, or 0.16%, the S&P 500 index closed down 0.07%, the Nasdaq Composite index closed down 0.36% and the Russell 2000 index closed up 0.12%.

There was $54 million in reported convertible bond trading volume about one hour into the session and $388 million heading into the market close with topical news sparking large movements in the space.

JetBlue Airways Corp. and Spirit Airlines, Inc. were once again dominating the headlines after JetBlue announced it had informed Spirit Airlines their merger agreement may be terminated after Jan. 28.

JetBlue’s 0.5% convertible notes due 2026 rallied on the announcement while Spirit Airlines’ 1% convertible notes due 2026 dropped on the news.

BrightSpring sinks

BrightSpring Health priced $400 million of $50-par three-year tangible equity units after the market close on Thursday at the cheap end of talk with a dividend of 6.75% and a threshold appreciation premium of 17.5%.

Price talk was for a dividend of 6.25% to 6.75% and a threshold appreciation premium of 17.5% to 22.5%.

Valuation of the units was difficult due to their pricing alongside the company’s IPO with the real value to be determined by BrightSpring’s equity, sources said.

BrightSpring’s IPO struggled and pricing came well below the targeted range of $15 to $18.

BrightSpring priced 53.3 million shares at $13 per share to raise $693.33 million.

While the equity priced about 15% below the low end of the targeted range, many investors still felt the price tag was too high with real demand coming at $11.

The equity units and stock tanked on their trading debut.

Trading began midway through the session with BrightSpring’s stock opening at $12 and continuing to collapse as the session progressed.

The $50-par equity units were trading at $46 shortly after hitting the tape and continued to move lower alongside stock.

The equity units closed Friday at $45; stock closed the day at $11, a decrease of 15.38%.

Merger mayhem

JetBlue and Spirit Airlines were once again dominating the headlines after JetBlue announced it had informed Spirit Airlines their merger agreement may be terminated after Jan. 28.

JetBlue’s 0.5% convertible notes due 2026 rallied on the announcement while Spirit Airlines fell.

JetBlue’s 0.5% convertible notes gained 1.5 points outright to trade up to 82 early in the session, a source said.

They were changing hands at 81.5 versus a stock price of $5.49 in the late afternoon.

There was $9 million in reported volume.

JetBlue’s stock traded to a low of $5.34 and a high of $5.54 before closing at $5.53, up 3.56%.

Spirit Airlines’ 1% convertible notes due 2026 dropped 4 points on the news albeit in light volume.

The notes traded down to 37.625 with a yield of 49.375% in early trade and were not active for the remainder of the session.

Spirit Airlines’ stock traded to a low of $5.68 and a high of $6.65 before closing at $6.25, a decrease of 13.43%.

The termination would come over Spirit Airlines’ objection with Spirit previously stating it expected JetBlue to stand by the agreement and appeal the verdict in the antitrust suit that blocked it.

Spirit Airlines’ 1% convertible notes traded down to the low 30s after the surprise verdict in the antitrust trial blocked JetBlue’s acquisition of the struggling airline.

However, the 1% convertible notes have been on the rebound over the past week and a half on optimism over an appeal.

Mentioned in this article:

BrightSpring Health Services Inc. Nasdaq: BTSG; BTSGU

JetBlue Airways Corp. Nasdaq: JBLU

Spirit Airlines, Inc. NYSE: SAVE

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