Volatility roils convertibles secondary; Norwegian Cruise volatile; BlackLine sinks

By Abigail W. Adams

Portland, Me., Feb. 11 – The last new deal of the week hit the convertibles secondary space on a volatile day for markets with equities gyrating between gains and losses before plummeting into the close.

NCL Corp. Ltd., a subsidiary of Norwegian Cruise Line Holdings Ltd., priced $435 million of five-year exchangeable notes after the market close on Thursday.

The new paper was volatile on an outright basis but maintained a minor dollar-neutral expansion in high-volume activity.

The new paper came as the secondary space continued to see head-spinning volatility.

Equity indexes wavered between gains and losses early in the session.

The Dow Jones industrial average was up 140 points, or 0.40%, the S&P 500 index was up 0.11%, the Nasdaq Composite was down 0.11% and the Russell 2000 index was up 0.94%, shortly before 11 a.m. ET.

Then U.S. officials issued a warning that Russia’s invasion of the Ukraine was imminent.

The Dow closed the day down 503 points, or 1.43%, the Nasdaq Composite closed down 2.78%, the S&P 500 closed down 1.9%, and the Russell 2000 closed down 1.02%.

There was $655 million in reported convertibles trading volume heading into the close with sellers firmly in control of the market.

“Have bid, will trade,” a source said of the tone.

Losses continued to mount for Affirm Holdings Inc.’s 0% convertible notes due 2026 following the head-spinning volatility of the previous session.

BlackLine Inc.’s 0% convertible notes due 2026 were also lower on an outright basis as disappointing earnings drove stock down double digits.

NCL volatile

NCL priced $435 million of five-year exchangeable notes after the market close on Thursday at par at the rich end of talk with a coupon of 2.5% and an initial exchange premium of 52.5%.

Price talk was for a coupon of 2.5% to 3% and an initial exchange premium of 47.5% to 52.5%, according to a market source.

The deal played to heavy demand during bookbuilding. However, the notes saw a lackluster secondary market performance.

The new 2.5% notes were changing hands at 100.125 versus a stock price of $22.66 early in the session.

“Nothing exciting there,” a source said.

However, the notes sank below par on an outright basis as stock plummeted heading into the afternoon.

The notes were changing hands at 98.5 versus a stock price of $21.61 in the late afternoon.

While down outright, the notes were seen up 0.25 to 0.5 point dollar-neutral on swap, a source said.

There was over $72 million in reported volume.

Norwegian Cruise Line’s stock traded to a high of $23 and a low of $21.32 before closing the day at $21.44, a decrease of 5.26%.

Affirm losses mount

Affirm’s 0% convertible notes due 2026 remained in focus on Friday with losses for the notes mounting.

The 0% convertible notes fell almost 4 points outright with stock down another 20%.

The notes were changing hands just shy of 75 versus a stock price of $52.01 early in the session.

They traded down to 73.875 versus a stock price of $45.96 in the late afternoon.

The notes contracted 1 point dollar-neutral on the move down, a source said.

Affirm’s stock traded to a high of $54.49 and a low of $45.58 before closing the day at $46.55, a decrease of 20.67%.

Affirm’s stock and convertible notes saw head-spinning volatility during Thursday session.

While stock was up more than 10% early in Thursday’s session in anticipation of positive earnings, it plummeted following the accidental early release of earnings and closed the day down more than 20%.

While the 0% convertible notes did a 6-point round-trip during Thursday’s volatility, they were moving in line dollar-neutral on a 50% hedge.

BlackLine down

BlackLine’s 0% convertible notes due 2026 sank on an outright basis as stock nosedived double-digits following earnings.

The 0% convertible notes were down more than 4 points outright with stock off 15%.

The notes were changing hands at 84.875 versus a stock price of $76.41 in the late afternoon.

There was more than $18 million in reported volume.

BlackLine’s stock traded to a low of $75.31 and a high of $83.88 before closing the day at $76.73, a decrease of 75.80%.

The cloud-based software company reported earnings per share of 8 cents versus analyst expectations for earnings per share of 10 cents.

Revenue was $115.3 million versus the $113.6 million analysts expected.

However, full-year revenue guidance fell well short of expectations with the company projecting net income of $5 million to $7 million versus analyst expectations for $45.5 million.

Mentioned in this article:

Affirm Holdings Inc. Nasdaq: AFRM

BlackLine Inc. Nasdaq: BL

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH

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