BlackBerry convertibles rise on debut; BrightSpring IPO struggles; American Airlines up

By Abigail W. Adams

Portland, Me., Jan. 25 – The convertibles primary market unleashed the first new paper of the week on Thursday with one more deal set to price after the market close.

BlackBerry Ltd. priced an upsized $175 million of five-year convertible notes after the market close on Wednesday, and BrightSpring Health Services Inc.’s $400 million offering of $50-par three-year tangible equity units is slated to price post-close alongside the company’s IPO.

BrightSpring’s offering was met with tepid demand with the IPO struggling and pricing well below the low end of the marketed range.

The new paper comes on a strong day for equities and Treasuries with the latest GDP print blowing past expectations.

Equity indexes notched strong gains at the open although they leaked into the close with markets cheering on the latest piece of macro data that supported a goldilocks scenario of rate cuts with no recession.

The Dow Jones industrial average closed Thursday up 243 points, or 0.64%, the S&P 500 index closed up 0.53%, the Nasdaq Composite index closed up 0.18% and the Russell 2000 index closed up 0.71%.

The secondary space remained relatively active with $131 million in reported convertibles trading volume about one hour into the session and $750 million on the tape about one hour before the market close.

BlackBerry’s new notes were in focus and putting in a strong performance on debut.

However, outside of the new paper, there was little excitement in the secondary space with the market largely flat.

“There’s been no real selling and no one’s really crazy to buy,” a source said. “It’s a holding pattern.”

High-grade issues continued to drive volume with Alliant Energy Corp.’s 3.875% convertible notes due 2026 (BBB+) and CenterPoint Energy Inc.’s 4.25% convertible notes due 2026 (Baa2) seeing heavy volume with little movement in price.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 gained outright as stock popped on an earnings beat.

BlackBerry gains on debut

BlackBerry priced an upsized $175 million of five-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 3% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 30% to 35%.

The initial size of the offering was $160 million. The $25 million greenshoe was not upsized.

The small refinancing deal was heard to be wall-crossed and mostly spoken for at the time of launch.

Proceeds from the offering will be used to fund the repayment or repurchase of the company’s outstanding $150 million 1.75% extendible convertible debentures due Feb. 15, 2024.

The new paper dominated activity in the secondary space and logged strong gains on debut.

The notes were trading at 103 versus a stock price of $2.95 about one hour after the opening bell, according to a market source.

They were marked at 102.5 bid, 103.5 offered versus a stock price of $2.93 in the late afternoon.

The notes were mostly trading outright early in the session, a source said.

There was $53 million in reported volume.

BlackBerry’s stock traded to a low of $2.84 and a high of $3.06 before closing at $2.98, up 1.71%.

BrightSpring struggles

BrightSpring plans to price $400 million of $50-par three-year tangible equity units after the market close on Thursday with price talk for a dividend of 6.25% to 6.75% and a threshold appreciation premium of 17.5% to 22.5%.

The tangible equity units are being marketed with assumptions of 600 bps over SOFR and a 40% to 37% vol. skew.

The deal is an interesting one with the equity units pricing concurrently with the company’s IPO, a rare, although not unheard of, situation.

While sources pegged the equity units 2 to 3 points cheap at the midpoint of talk, the real value will be determined by the company’s equity, sources said.

BrightSpring’s IPO was heard to have struggled with investors pushing back against the initially marketed range of $15 to $18.

The company is expected to price its 53.3 million share offering at $13; however, the real demand from investors was at $11, a source said.

The IPO is not expected to trade well on debut.

High-grade trades

High-grade names continued to drive volume in the secondary space with Alliant Energy’s 3.875% convertible notes due 2026 and CenterPoint Energy’s 4.25% convertible notes due 2026 in focus.

While active, the notes saw little price movement.

Alliant’s 3.875% convertible notes due 2026 were trading at 98.25 versus a stock price of $48.65 in the late afternoon.

There was $62 million in reported volume.

Alliant’s stock traded to a low of $48.28 and a high of $48.93 before closing at $48.75, up 1.27%.

CenterPoint Energy’s 4.25% convertible notes due 2026 were changing hands at 99.5 versus a stock price of $27.50 in the late afternoon.

There was $38 million in reported volume.

CenterPoint’s stock traded to a low of $27.17 and a high of $27.63 before closing at $27.52, up 1.4%.

American Airlines earnings

American Airlines’ 6.5% convertible notes due 2025 gained outright as stock jumped following an earnings beat.

The 6.5% notes were up 4.5 points outright with stock up more than 9%.

The notes were trading at 115.625 versus a stock price of $15.13 in the late afternoon, according to a market source.

However, they were largely moving in line dollar-neutral.

Volume was light with about $6 million on the tape in the late afternoon.

American Airlines’ stock traded to a low of $14.52 and a high of $15.46 before closing at $15.36, an increase of 10.27%.

The airline reported earnings per share of 29 cents versus analyst expectations for earnings of 8 cents.

Revenue was $13.06 billion versus the $13.05 billion expected.

Mentioned in this article:

Alliant Energy Corp. Nasdaq: LNT

American Airlines Group Inc. Nasdaq: AAL

BlackBerry Ltd. NYSE: BB

CenterPoint Energy Inc. NYSE: CNP

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