Southwest Airlines in focus pre-earnings; Sea down outright; Sunrun trades; Avalara up

By Abigail W. Adams

Portland, Me., Oct. 20 – It was a quiet day in the convertibles secondary space with the primary market poised for its third week with no deal activity.

While the primary market has been quiet over the past few weeks, new deal activity is expected to resume during the Oct. 25 week.

Equity markets were mixed on Wednesday with the rally in tech and growth stocks beginning to waiver as the 10-year Treasury yield ticked higher, closing the day at 1.66%, following a 20-year Treasury auction that reflected weak demand.

The Dow Jones industrial average closed the day up 152 points, an increase of 0.43%, the S&P 500 index closed up 0.37% and the Russell 2000 index closed up 0.61%.

However, the Nasdaq Composite closed the day down 0.05%.

There was $436 million on the tape about one hour before the market close with few names seeing concentrated trading activity, a source said.

However, Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) were among the top traded issues of the day with the airline set to report earnings prior to the market open on Thursday.

Sea Ltd.’s 0.25% convertible notes due 2026 were again major volume movers with the notes coming in on an outright basis although they were largely unchanged dollar-neutral.

Avalara Inc.’s 0.25% convertible notes due 2026 were active with the notes improved.

Sunrun Inc.’s 0% convertible notes due 2026, an off-the-run issue that rarely trades, also made an appearance on the tape although the notes were largely unchanged.

Southwest’s earnings

Southwest Airlines’ 1.25% convertible notes due 2025 were among the top traded issues during Wednesday’s session as the market awaited the airline’s third-quarter earnings report.

The 1.25% notes were largely unchanged in the activity.

The convertibles were changing hands at 144.75 versus a stock price of $49.44 in the late afternoon.

There was $13.5 million in reported volume.

Southwest Airlines’ stock traded to a high of $49.97 and a low of $48.86 before closing the day at $49.47, an increase of 0.20%.

The airline is set to report earnings prior to the market open on Thursday.

United Airlines reported a large earnings beat on Tuesday while also warning about the impact of rising fuel costs.

United Airlines’ stock was down 0.58% following its earnings.

Sea comes in outright

Sea’s 0.25% convertible notes due 2025 remained active in the secondary space.

While the notes were giving back some of their outright gains as stock came in, the notes were moving in line on a dollar-neutral, or hedged, basis, a source said.

The 0.25% convertible notes were changing hands at 107.375 early in the session.

They were trading just shy of 107.5 versus a stock price of $359.74 in the late afternoon.

There was $11 million in reported volume about one hour before the market close.

Sea’s American Depositary Shares traded to a low of $356.58 and a high of $371.64 before closing the day at $360.60, a decrease of 1.75%.

Sea is a Singapore-based global consumer internet company.

Avalara improves

Avalara’s 0.25% convertible notes due 2026 were coming in on an outright basis but improved dollar-neutral as stock dropped on Wednesday.

The 0.25% convertible notes were changing hands at 104 versus a stock price of $176.85 in the late afternoon.

There was about $12 million in reported volume.

The notes were better to buy, a source said.

Avalara’s stock traded to a high of $178.99 and a low of $175.30 before closing the day at $176.76, an increase of 3.25%.

Sunrun active

Sunrun’s 0% convertible notes due 2026, an off-the-run issue that rarely trades, made an appearance on the tape on Wednesday although the notes were little changed.

The 0% convertible notes continued to change hands around 88.5, a source said.

Sunrun’s stock traded to a low of $50.68 and a high of $52.26 before closing the day at $51.72, an increase of 0.19%.

Sunrun, a San Francisco-based residential solar panel company, has seen its stock rally almost 20% over the past month.

However, the convertible notes have not participated in the rally with the premium on the notes almost 130%.

Green energy companies have seen a surge of investor interest with tax incentives built into the infrastructure bill currently being debated in Congress.

However, there is speculation that those tax incentives may need to be removed in order for the legislation to pass.

Mentioned in this article:

Avalara Inc. NYSE: AVLR

Sea Ltd. NYSE: SEA

Southwest Airlines Co. NYSE: LUV

Sunrun Inc. Nasdaq: RUN

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.