Convertibles secondary quiet; Chegg improves; Sabre preferreds active; Antero above par

By Abigail W. Adams

Portland, Me., Aug. 21 – After a flurry of activity driven by an influx of more than $4 billion of new convertible securities over the week, the secondary space was quiet on Friday as activity surrounding the new deals tapered off.

However, while volume was lighter, several new deals remained in focus.

Chegg Inc.’s convertible notes were the top volume movers in the convertible bond space with its newly priced 0% convertible bonds due 2026 continuing to improve.

Antero Resources Corp.’s 4.25% convertible notes due 2026 popped back above par on Friday after largely trading below since their aftermarket debut on Wednesday.

Sabre Corp.’s 6.5% series A mandatory convertible preferred stock remained active.

While the stock gained outright early in the session, they again traded off alongside stock in the afternoon and remained unchanged dollar-neutral.

While quiet on Friday, the convertible market remained strong with the S&P 500 index and Nasdaq closing at all-time highs.

The secondary space added to its record returns.

With Tesla Inc.’s stock breaking past $2,000 over the past week and closing Friday at $2,049.98, Tesla’s convertible notes moved even deeper in the money.

The outstanding tranches were trading in the 600s, a source said.

With Tesla’s convertible notes a top holding in the iShares Convertible Bond ETF and the SPDR Bloomberg Barclays Convertible Securities ETF, year-to-date returns were 29.66% and 24.4%, respectively.

Chegg improves

Chegg’s 0% convertible notes due 2026 were major volume movers on Friday with the notes making nominal gains.

The 0% convertible notes were up about 0.25 point outright to 102.875 early in the session.

They rose to 103.25 as stock continued to gain in the afternoon.

The notes expanded about 0.5 point dollar-neutral, a source said.

Chegg’s 0.125% convertible notes due 2025 were also active with the notes trading around 161.5.

They were up 0.25 point dollar-neutral.

Chegg stock was volatile on Friday and wavered between gains and losses before closing the day largely flat.

Stock traded to a high of $79.01 and a low of $77.13 before closing Friday at $77.79, a decrease of 0.14%.

Sabre active

Sabre’s 6.5% series A mandatory convertible preferred stock remained active on Friday.

While the notes were improving outright early in Friday’s session, they again traded off alongside its common stock.

The $100-par 6.5% mandatory preferred stock traded up to $98.50 early Friday with stock up more than 1%.

However, they were marked at $96.75 bid versus a stock price of $6.77 in the mid-afternoon.

While the preferreds continued to trade lower on an outright basis, they remained largely unchanged dollar-neutral.

The mandatory convertible preferreds are an extremely equity sensitive name, a source said.

The travel technology company’s stock traded to a high of $6.95 and a low of $6.67 before closing the day at $6.76, a decrease of 0.73%.

Antero above par

Antero Resources’ 4.25% convertible notes due 2026 popped above par on Friday after largely trading below since hitting the aftermarket.

The 4.25% notes were marked at par bid, 100.25 offered in the midafternoon.

The notes from the oil and gas company have largely traded on a 99-handle since hitting the aftermarket on Wednesday.

The 4.25% notes from the frequent junk bond issuer were the company’s debut appearance in the convertible market.

However, the convertible notes “haven’t done much,” a source said.

Antero stock traded to a high of $3.77 and a low of $3.57 before closing the day at $3.66, an increase of 1.10%.

Mentioned in this article:

Antero Resources Corp. NYSE: AR

Chegg Inc. NYSE: CHGG

Sabre Corp. Nasdaq: SABR

Tesla Inc. Nasdaq: SABR

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