Morning Commentary: Slack convertibles on deck; Carnival jumps outright

By Abigail W. Adams

Portland, Me., April 6 – The convertible primary market seized on the improving tone of the market on Monday and launched an overnight deal.

Slack Technologies Inc. plans to price $600 million in five-year convertible notes after the market close on Monday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 25% to 30%.

The deal is being marketed with assumptions of 500 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal modeled a little more than 4.125 points cheap at the midpoint of talk, a source said.

Another source also pegged the offering about 4 points cheap at the midpoint of talk.

The San Francisco-based business communication software company facilitates remote work. Stock has held up relatively well amid the coronavirus-induced sell-off in March.

Meanwhile, trading activity in the secondary space was light as equity markets surged on optimism the coronavirus pandemic has peaked.

There was $51 million in reported volume a little over one hour into Monday’s session.

And Carnival Corp.’s recently priced 5.75% convertible notes due 2023 accounted for more than half of that volume with $26 million on the tape.

Carnival’s 5.75% notes jumped on an outright basis alongside stock following news that Saudi Arabia’s public investment fund had taken a minority stake in the company.

The 5.75% notes were up almost 10 points outright.

They were changing hands at 113.75 early in the session.

Carnival stock was $9.81, an increase of 15.55%, shortly before 11 a.m. ET.

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