Winnebago notes jump on secondary debut; Spirit Airlines bounces back; Wayfair active

By Abigail W. Adams

Portland, Me., Jan. 19 – The convertibles primary market closed the week with one small refinancing pricing, the continuation of a steady stream of issuance that is expected to accelerate as issuers come out of earnings blackouts.

Winnebago Industries Inc. priced $300 million of six-year convertible notes after the market close on Thursday.

Winnebago’s offering was the third new deal to price in 2024 with refinancing the use of proceeds in each offering.

The new paper hit the secondary space on a strong close for equity markets with the S&P 500 index shooting to fresh heights.

The Dow Jones industrial average closed Friday up 395 points, or 1.05%, the S&P 500 index closed up 1.23%, the Nasdaq Composite index closed up 1.7% and the Russell 2000 index closed up 1.08%.

There was $500 million in reported convertible bond trading volume in the late afternoon with Winnebago’s new notes making a strong aftermarket debut.

Spirit Airlines, Inc.’s 1% convertible notes due 2026 bounced back after plunging about 40 points over the past three trading sessions with the airline encouraging JetBlue to appeal the verdict that blocked the merger.

Wayfair Inc.’s convertible notes experienced a fresh round of activity with the notes up outright and the lower dollar price notes gaining on hedge as stock soared following a mass layoff.

Winnebago strong

Winnebago priced $300 million of six-year convertible notes after the market close on Thursday at the midpoint of initial talk with a coupon of 3.25% and an initial conversion premium of 30%.

Price talk was for a coupon of 3% to 3.5% and an initial conversion premium of 27.5% to 32.5% with the range tightening to a coupon of 3% to 3.25% and an initial conversion premium of 30% to 32.5% during book building due to strong demand, sources said.

Winnebago’s new 3.25% convertible notes dominated activity in the secondary space and posted large gains on an outright and dollar-neutral basis with stock in the red during Friday’s session.

The 3.25% convertible notes traded as high as 103.125 early in the session.

The notes were trading at 102.25 versus a stock price of $66.73 in the late afternoon.

Swap trades accounted for the lion’s share of activity in the name.

The notes expanded about 2.5 points dollar-neutral.

There was $88 million in reported volume.

The deal was a refinancing with the RV manufacturer repurchasing $241 million in principal of its 1.5% convertible notes due 2025 for $295 million in privately negotiated transactions.

The buyback sparked activity in the 1.5% notes with the notes repurchased at 122.089, a source said.

However, the notes were trading at 115.875 post buyback.

Winnebago’s stock traded to a low of $65.75 and a high of $69.75 before closing at $67.58, off 0.089%.

Spirit Airlines rebounds

Spirit Airlines’ 1% convertible notes due 2026 bounced back after a 40-point nosedive over the past three sessions with the company pushing JetBlue to appeal the verdict in the antitrust trial that blocked the merger.

The 1% convertible notes gained about 7 points outright.

They were trading at 38.75 in the late afternoon with the yield now about 47.375%, according to a market source.

There was $13 million in reported volume.

While the convertibles are not equity sensitive, Spirit Airlines’ stock also bounced back to close the day at $6.68, an increase of 17.19%.

Spirit Airlines’ capital structure went into a tailspin after the surprise verdict in the antitrust trial seeking to block JetBlue’s acquisition of the company.

However, the company was on the rebound on Friday after it announced that it was encouraging JetBlue to appeal the verdict in the antitrust case.

The company also upped its fourth-quarter guidance and announced that it was planning to refinance its debt.

Wayfair active

Wayfair’s convertible notes were active on Friday as stock gained after the company announced mass layoffs.

While its higher dollar-price bonds were up outright, they were largely moving in line dollar-neutral.

However, the company’s lower price convertible notes improved on hedge.

Wayfair’s 3.5% convertible notes due 2028 added about 8.5 points outright with stock up more than 11% in intraday activity.

The 3.5% notes were changing hands at 143.125 versus a stock price of $55.11 in the late afternoon, according to a market source.

There was $12 million in reported volume.

The 3.25% convertible notes due 2027 gained 9 points outright.

They were trading at 119.375 versus a stock price of $55.01 in the late afternoon.

There was $8 million in reported volume.

The 1% convertible notes due 2026 rose 2 points outright.

They were trading at 87 versus a stock price of $54.99 in the late afternoon.

The notes expanded about 0.375 point on hedge, a source said.

Wayfair’s stock traded to a low of $54.53 and a high of $58.30 before closing at $56.13, an increase of 10.28%.

Wayfair’s stock soared after it announced it was laying off about 13% of its workforce. The company also upped its profit forecast for 2024.

Mentioned in this article:

Spirit Airlines, Inc. NYSE: SAVE

Wayfair Inc. Nasdaq: W

Winnebago Industries Inc. NYSE: WGO

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