Rivian on deck; BridgeBio convertible notes skyrocket on clinical trial; PPL active

By Abigail W. Adams

Portland, Me., March 6 – The convertibles primary market promised another active week with a sizable offering launching post-close.

Rivian Automotive Inc. plans to price $1.3 billion of six-year green convertible notes after the market close on Tuesday in a Rule 144A offering.

Goldman Sachs & Co. LLC is lead left bookrunner for the offering, which carries a greenshoe of $200 million.

Further details were not available by press time.

Meanwhile, it was a relatively quiet start to the week in the secondary space with the activity surrounding recent issues settling.

Equity indexes were mixed to start the week with the tech-heavy Nasdaq starting the day strong but falling into negative territory by the close and small cap stocks underperforming.

The Dow Jones industrial average closed Monday up 40 points, or 0.12%, the S&P 500 index closed up 0.07%, the Nasdaq Composite index closed down 0.11% and the Russell 2000 index closed down 1.55%.

There was $85 million in reported convertibles trading volume about one hour into the session and $300 million on the tape in the late afternoon with topical news pushing BridgeBio Pharma Inc.’s convertible notes into the spotlight.

BridgeBio’s convertible notes skyrocketed on an outright and dollar-neutral basis in heavy volume as stock added more than 50% following positive results from a clinical trial.

PPL Capital Funding Inc.’s 2.875% convertible notes due 2028 (Baa1/BBB+) also remained active with several $5 million plus trades on the tape although there was little movement in price.

iQIYI, Inc.’s 4% convertible notes due 2026 continued to improve in active trade after the company repurchased a portion of the outstanding amount with proceeds from a Regulation S offering.

BridgeBio skyrockets

BridgeBio was the name of the day on Monday as its convertible notes and stock skyrocketed following positive results from a clinical trial.

The 2.25% convertible notes due 2029 dominated activity in the secondary space.

The distressed 2.25% convertible notes jumped 15 points outright.

They were changing hands at 56 versus a stock price of $17.77 early in the session.

The yield was about 13.25%, a source said.

The notes were seen at 56.5 in the late afternoon with the yield narrowing to about 13%.

There was $30 million in reported volume.

The 2.25% notes have long been in distressed territory.

They were trading at 40 heading into Monday’s session after recovering from an all-time low of 33 in late January.

While the notes mostly trade for their yield, the theoretical delta was 100% heading into Monday’s session, although accounts played the notes differently, a source said.

The notes moved to a 60% to 65% delta early Monday.

They made at least a couple points on hedge, a source said.

While less active, BridgeBio’s 2.5% convertible notes due 2027 jumped 20 points outright.

They were changing hands at 74.25 versus a stock price of $17.71 in the late afternoon.

The yield was about 10.25%.

The notes also expanded several points on hedge.

There was $10 million in reported volume.

BridgeBio’s stock traded to a low of $16.28 and a high of $19.39 before closing at $16.52, an increase of 51.98%.

Stock skyrocketed after the biopharmaceutical company announced positive results from a clinical trial for a treatment for disproportionate dwarfism.

PPL active

PPL’s 2.875% convertible notes saw heavy volume but with little movement in price during Monday’s session.

The 2.875% notes continued to trade in the 98 to 98.125 context with stock largely flat.

There was $21 million in reported volume but only five trades on the tape in the early afternoon with several $5 million plus prints, according to a market source.

PPL’s stock traded to a low of $27.35 and a high of $27.56 before closing at $27.48, an increase of 0.33%.

The investment-grade rated convertible notes had a strong start in the aftermarket with the notes, which priced at par on Feb. 21, gaining on an outright and dollar-neutral basis.

However, the notes gave back their early gains with two more investment-grade rated convertible notes offerings from companies with similar profiles hitting the secondary space in rapid succession.

The convertible notes sank below par and contracted dollar-neutral last week with PPL carrying a longer duration and lower coupon than Alliant Energy Corp.’s 3.875% convertible notes due 2026 (BBB+) and Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB).

iQIYI gains

iQIYI’s 4% convertible notes due 2026 continued their upward momentum in active trade after the company repurchased a portion of the notes with proceeds from a Regulation S offering.

The 4% convertible notes added another 0.25 point outright to trade up to 93 in the late afternoon, according to a market source.

The yield-to-put fell to about 9.5%.

The 4% notes are putable on Aug. 1, 2024.

There was $7 million in reported volume.

The notes have traded in the 92.25 to 92.75 context since last Wednesday when the Beijing-based online entertainment provider priced its Regulation S offering.

Prior to the pricing, the notes were trading on an 88-handle.

iQIYI priced $600 million 6.5% convertible notes due 2028 at par last Wednesday.

While the offering was dollar-denominated and the notes are convertible into the company’s Nasdaq listed ADSs, trading in the issue must be done off of international desks.

While access to trading in the issue is limited, the 6.5% notes have ripped in the aftermarket.

The 6.5% notes traded up to 106.25 versus an equity price of $7.64 in the late afternoon, a source said.

iQIYI’s ADSs traded to a high of $7.86 and a low of $7.53 before closing at $7.59, down 1.43%.

The company repurchased $245 million in principal of its 4% convertible notes due 2026 in privately negotiated transactions with proceeds from the sale of the 6.5% notes.

Remaining proceeds are to be used for the repayment or repurchase of debt securities.

Mentioned in this article:

Alliant Energy Corp. Nasdaq: LNT

BridgeBio Pharma Inc. Nasdaq: BBIO

iQIYI, Inc. Nasdaq: IQ

PPL Corp. NYSE: PPL

Southern Co. NYSE: SO

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