Uber, Microstrategy convertibles on tap; Shift4 notes gain; American Airlines soars

By Abigail W. Adams

Portland, Me., Dec. 7 – The convertibles primary market stood poised for another active week with two deals launching after the market close.

Uber Technologies Inc. plans to make its convertibles market debut with a $1 billion offering of five-year notes.

MicroStrategy Inc. is also on tap with a $400 million offering of five-year convertible notes.

Both deals were slated to price after Tuesday’s close.

Meanwhile, the secondary space saw an active session for a Monday with $100 million on the tape less than one hour after the opening bell and more than $500 million in reported volume about one hour before the market close, sources said.

Volume has been high for the past week.

There was speculation some of the trading activity was driven by accounts making room for new paper.

There may also be some profit-taking going on as the secondary space closes out one of its best years for returns in recent history.

Shift4 Payments Inc.’s 0% convertible notes due 2025, the most recent new deal to hit the convertibles secondary space, remained active with the notes continuing to improve.

Pioneer Natural Resources Co.’s 0.5% convertible notes due 2025 were also among the top traded issues of Monday’s session with the notes hitting a new outright high.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 continued to rip with the notes again setting a new outright high and improving dollar-neutral.

On deck

The convertibles primary market stood poised for another busy week with two deals on deck.

Uber plans to price $1 billion of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0% to 0.25% and an initial conversion premium of 42.5% to 47.5%, according to a market source.

BofA Securities Inc. (lead left), J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, Barclays and Citigroup Global Markets Inc. are joint bookrunners for the Rule 144A offering, which carries a greenshoe of $150 million.

MicroStrategy plans to price $400 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Jefferies LLC is bookrunner for the Rule 144A offering, which carries a greenshoe of $60 million.

Proceeds will be used, in part, to invest in Bitcoin.

Pioneer Natural active

Pioneer Natural Resources’ 0.5% convertible notes due 2025 were among the top traded issues of Monday’s session with the notes hitting a new outright high.

The notes were changing hands just shy of 129 versus an equity price of $111.48 early in the session, according to a market source.

However, they traded down to 128.25 in the late afternoon as stock came in.

The level is the highest outright level for the notes since early June when they briefly traded up to a 128-handle, according to Trace data.

Pioneer’s stock traded to a high of $112.72 and a low of $109.65 before closing the day at $110.28, a decrease of 3.31%.

The 0.5% notes trade extremely rich, a source said.

However, the company is one of the only investment-grade energy companies in the convertibles universe, which was one of the factors driving the valuation of the notes.

“There aren’t a lot of places to play it,” a source said.

The oil and gas company will hold a special shareholders meeting on Saturday to seek approval for its planned acquisition of Parsley Energy Inc.

Pioneer announced its plans to acquire Parsley in late October in an all-stock deal where Parsley stockholders would receive 0.1252 of a share of Pioneer Natural Resources stock for each share of Parsley stock, according to a company news release.

Shift4 gains again

Shift4’s recently priced 0% convertible notes due 2025 continued to improve in active trading on Monday.

The notes traded up to 110 early in the session.

They came in alongside stock as the session progressed and were on a 109-handle in the mid-afternoon, sources said.

The notes continued to improve dollar-neutral.

Shift4’s stock traded to a high of $63.60 and a low of $60.51 before closing the day at $60.70, a decrease of 2.96%.

The payment processing company’s 0% notes have ripped since making their aftermarket debut last Thursday with the notes expanding more than 4 points dollar-neutral.

American Airlines soars

American Airlines’ once struggling 6.5% convertible notes due 2025 continued to soar in high-volume activity on Monday.

The notes again hit a new outright high and continued to gain dollar-neutral.

The 6.5% notes traded up to 130 on Monday.

They expanded another 0.75 point dollar-neutral.

“They’re rocketing,” a source said.

American Airlines’ stock traded to a high of $18.07 and a low of $16.47 before closing the day at $17.21, an increase of 4.94%.

The notes have been on a tear since mid-November, which has been fueled by optimism surrounding a Covid-19 vaccine.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

MicroStrategy Inc. Nasdaq: MSTR

Pioneer Natural Resources Co. NYSE: PXD

Shift4 Payments Inc. NYSE: FOUR

Uber Technologies Inc. NYSE: UBER

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