YY convertibles hit the secondary market, expand on debut; Weibo skyrockets on rating

By Abigail W. Adams

Portland, Me., June 20 – The convertibles secondary space saw another strong day on Thursday as markets extended their rally in the wake of the Federal Reserve’s meeting.

With many considering an interest rate cut all but guaranteed, there was substantial buying activity in the secondary space.

While some sources were skeptical about the longevity of the continuous gains in equities, the prevailing attitude was risk on.

The buying activity was pushing the secondary space higher, sources said.

China-based social media platforms were the theme of the day as new paper from YY Inc. hit the secondary space and Weibo Corp. was given investment-grade status.

YY’s newly priced tranches dominated trading activity with the notes expanding on their market debut.

Weibo’s 1.25% convertible notes due 2022 gained outright and skyrocketed dollar-neutral after a new straight debt offering received an investment-grade rating.

Meanwhile, Green Plains Inc.’s newly priced 4% convertible notes due 2024 were making gains on an outright basis on their second day in the secondary space after a lackluster debut.

YY expands

YY’s two tranches of convertible notes dominated activity in the secondary space, accounting for $214 million of the $549 million in reported volume on the tape by the mid-afternoon.

YY priced its $850 million two-tranche offering prior to the market open with both tranches pricing at the cheap end of talk.

The company priced a $425 million tranche of six-year convertible notes at par with a coupon of 0.75% and an initial conversion premium of 35%.

Price talk was for a coupon of 0.25% to 0.75% and an initial conversion premium of 35% to 40%.

The company also priced a $425 million tranche of seven-year convertible notes at par with a coupon of 1.375% and an initial conversion premium of 35%.

Price talk was for a coupon of 0.875% to 1.375% and an initial conversion premium of 35% to 40%.

The new notes from the Guangzhou, China-based global social media platform expanded on their market debut.

The 1.375% convertible notes due 2026 were changing hands around 102 with stock up about 0.5% early the session, a market source said.

The 0.75% convertible notes due 2025 were changing hands around 101.875 soon after the opening bell.

However, stock came in as the session progressed.

Both tranches were seen hovering around 101 with stock down to $70.74 in intraday trading.

The 0.75% notes expanded about 1 point dollar-neutral and the 1.375% notes about 1.25 points dollar-neutral, a market source said.

The 1.375% notes saw more than $115 million in reported volume and the 0.75% notes more than $98 million in reported volume by the mid-afternoon.

YY’s ADSs traded as high as $72.45 and as low as $69.96 before closing the day largely flat at $71.03, a decrease of 0.01%.

Weibo skyrockets

Weibo’s 1.25% convertible notes due 2022 gained outright and skyrocketed on a dollar-neutral basis on Thursday after the Beijing-based social media company’s new debt offering was given an investment-grade rating.

The 1.25% convertible notes jumped about 4 points outright.

They were seen changing hands at 93 versus an equity price of $35.49 in the mid-afternoon, according to a market source.

However, the notes expanded 3 points to 5 points dollar-neutral, a market source said.

“They got lifted,” the source said.

The bonds saw about $10 million in reported volume by the late afternoon.

Weibo’s ADSs traded as high as $44.42 before coming in to close the day at $43.02, an increase of 1.89%.

Weibo announced a new senior notes offering on Thursday. Moody’s Investors Service gave Weibo an issuer credit rating of Baa1 and S&P Global Ratings gave Weibo a rating of BBB.

Weibo priced an $800 million issue of the 1.25% convertible notes in October 2017, its first tap of domestic capital markets.

The convertible notes were not rated.

Moody’s and S&P both cited healthy revenue growth and low debt leverage as reasons for the investment-grade ratings.

Green Plains improves

Green Plains’ newly priced 4% convertible notes were making gains on Thursday with the notes approaching par after sinking on their Wednesday debut.

The 4% notes were changing hands at 99.5 in the mid-afternoon with about $7 million of the bonds on the tape.

After tanking following Green Plains’ announcement of a dividend suspension on Wednesday, Green Plains stock recovered.

Green Plains stock traded as high as $11.91 before closing Thursday at $11.73, an increase of 3.08%.

The 4% convertible notes traded as low as 96.375 on their market debut on Wednesday with stock down as much as 15% but closed the day just shy of 98 with stock paring its losses and closing the day down about 8.75%.

While the notes traded down, they modeled extremely cheap with the drop in stock most likely anticipated and factored into the pricing, a source said.

Mentioned in this article:

Green Plains Inc. Nasdaq: GPRE

Weibo Corp. Nasdaq: WB

YY Inc. Nasdaq: YY

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