Morning Commentary: New Arch Resources convertibles price; Twitter notes drop with stock

By Rebecca Melvin

New York, Oct. 30 – Arch Resources Inc.’s new 5.25% convertibles priced mixed to talked terms and were not yet heard in trade early Friday after the St. Louis-based mining company priced an upsized $135 million of the five-year notes with a 25% initial conversion premium.

Arch Resources shares bounced back a little bit early Friday after dropping on Thursday.

Twitter Inc.’s sister convertible bonds traded down as the underlying stock plunged following the company’s earnings report, which showed slowing user growth.

Arch notes eyed

Arch Resources’ new notes priced with a 5.25% coupon and a 25% premium, at the cheap end of talk for a 4.75% to 5.25% coupon and at the middle of talk for a 22.5% to 27.5% initial conversion premium.

Meanwhile, the bond’s underlying security, Arch’s common stock, was last up 85 cents, or 2.9%, at $30.72. The shares plunged on Thursday after the new convertible offering was announced. They closing down 17% on Thursday as shareholders appeared to express their dismay at the prospect of dilution that could result if the bonds are converted. The shares have a 52-week high of $81.60.

The company’s nearer dated straight bonds – the 2026 notes with a 4% coupon – traded off about 0.4 point, according to Trace data.

Twitter drops

Twitter’s 1% convertibles due 2021 were trading around par, which was off more than 2 points outright, according to Trace data at late morning. The Twitter 0.25% convertibles due 2024 were trading more actively than the near-dated paper and slipped below 110 compared to 120 bid, 121 offered on Thursday.

By late morning on Friday, Twitter’s shares had skidded $10.80, or 20.6%, to $41.65.

The social media company reported that it has 187 million daily users on average, compared to expectations for daily user volume of 195.6 million. The company’s third-quarter results overall were stronger than expected, however, with the healthy numbers said to be boosted by advertiser demand.

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