RingCentral convertibles in focus on buyback; Bloom Energy notes gain; IG names active

By Abigail W. Adams

Portland, Me., May 19 – The convertibles secondary space saw a quiet end to a quiet week with trading volume light as activity surrounding new and recent issues continued to dry up.

Hopes for an active calendar were dashed this past week with the primary market sluggish compared to an explosion of high-grade issuance with the investment-grade primary market logging its busiest week of the year.

“That’s where the focus is,” a source said, pointing to the heavy trading of investment-grade rated convertible notes.

The primary market is expected to move at a slow pace in the coming week as well with the calendar heard to be not as robust as many had anticipated.

Equity indexes closed Friday in the red after logging two consecutive days of gains with a risk-off sentiment returning as debt-ceiling negotiations drag on.

The Dow Jones industrial average closed down 109 points, or 0.33%, the S&P 500 index closed down 0.14%, the Nasdaq Composite index closed down 0.24% and the Russell 2000 index closed down 0.62%.

There was $93 million in reported convertible bond trading volume one hour into the session and $400 million on the tape about one hour before the market close.

While IG rated convertibles remained active on Friday, it was topical news that drove volume.

RingCentral Inc.’s 0% convertible notes due 2025 were the most actively traded name in the space due to the company’s buyback of the notes.

While the notes were lifted in the buyback, they returned to their previous level by the close.

Western Digital Corp.’s 1.5% convertible notes due Feb. 1, 2024 (Baa3) and CMS Energy Corp.’s 3.375% convertible notes due 2028 (Baa2) were the high-grade names in focus on Friday although with little movement in price.

Bloom Energy Corp.’s 3% convertible notes due 2028 were volatile outright but added on swap in light volume.

RingCentral’s buyback

RingCentral’s 0% convertible notes due 2025 were the name of the day on Friday after the company announced a privately negotiated buyback of a portion of the notes.

The 0% notes were lifted in the buyback with the company paying 92.25 for the notes, a source said.

The notes remained active following the buyback but returned to their previous level to close the day at 90.875.

There was $29 million in reported volume.

RingCentral’s stock traded to a high of $32.01 and a low of $30.47 before closing at $31.02, down 0.032%.

The cloud-based communications provider announced pre-open that it had repurchased approximately $461 million in principal of the 0% notes for $425 million in cash in privately negotiated transactions.

The company was able to negotiate a buyback at a tight range to their secondary trading level, a source said.

Buybacks typically provide more of a kiss to holders.

The company used cash on hand and drawdowns from its term loan facility to fund the repurchases.

The buyback leaves $539 million of the 0% notes outstanding.

IG trades

Investment-grade names remained the trades of the day with several issues continuing to see heavy volume.

Western Digital’s soon-to-mature 1.5% convertible notes due Feb. 1, 2024 returned to the top of the volume charts on Friday although with little movement in price.

While there were several odd-lot prints as high as 97.5, round-lot trading remained in a tight range between 96.5 to 96.75 for a yield between 6.75% and 6.375%, according to a market source.

There was $13 million in reported volume.

CMS Energy’s 3.375% convertible notes due 2028 were also active with the notes continuing to trade around 100.25.

There was $12.5 million in reported volume.

CMS’ stock traded to a high of $59.30 and a low of $58.57 before closing at $58.63, off 0.19%.

Bloom Energy adds

Bloom Energy’s 3% convertible notes due 2028 were volatile outright but up on swap on Friday.

The 3% notes gained as much as 4 points outright with stock strong to start the day.

However, the notes in came alongside stock as the session progressed.

“Stock round-tripped,” a source said.

The 3% notes were changing hands at 103.5 into the close.

They gained about 0.25 point dollar-neutral.

Bloom Energy’s stock traded to a low of $13.75 and a high of $14.77 before closing at $13.94, an increase of 2.12%.

Mentioned in this article:

Bloom Energy Corp. NYSE: BE

RingCentral Inc. NYSE: RNG

Western Digital Corp. Nasdaq: WDC

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