Expedia convertibles draw buyers; Radius active; SmileDirectClub lower on stalled talks

By Abigail W. Adams

Portland, Me., March 28 – The convertibles primary market was dormant on Tuesday with the window of opportunity for new issuance before the quarter draws to a close narrowing.

The lack of deal-making was a surprise to some; however, the uncertainty in the market has been keeping potential issuers at bay, sources said.

While refinancings were looked to as a major source of primary market activity, convertible issuers have found alternatives to meet their looming maturities.

LivePerson Inc. announced late last week the repurchase of approximately 68% of its 0.75% convertible notes due 2024.

Upwork Inc. also announced late last week the repurchase of $196.8 million in principal of the 0.25% convertible notes due 2026.

While primary market activity may be falling short of expectations, new issuance is still nearly double what it was at this time in 2022.

Meanwhile, it was another quiet day in the convertibles secondary space as broader markets struggled to find direction.

Equity indexes launched Tuesday’s session mixed as Treasuries stabilized with the Nasdaq Composite index the laggard as the market reassessed its rate cut bets.

However, indexes were dragged into negative territory as the session progressed with the Dow Jones industrial average closing Tuesday down 38 points, or 0.12%, the S&P 500 index closing down 0.16%, the Nasdaq Composite index closing down 0.45% and the Russell 2000 index closing down 0.06%.

Few were making moves amid the uncertainty in the market with $75 million in reported convertibles trading volume about one hour into the session and $410 million in reported volume about one hour before the market close.

Investment-grade issues continued to dominate the tape with Expedia Inc.’s 0% convertibles due 2026 (Baa3/BBB/BBB-) attracting buyers on Tuesday.

The broader secondary space remained relatively quiet outside of IG issues.

“If you’re not involved in them, you’re not doing much,” a source said.

However, topical news continued to bring some outstanding issues to the forefront.

Radius Global Infrastructure Inc.’s 2.5% convertible notes due 2026 saw a flurry of activity early in the session although with little change in price as law firms announced their investigation of the company’s acquisition.

SmileDirectClub Inc.’s 0% convertible notes due 2026 sank to a 10-handle following news that negotiations with holders for a distressed debt exchange had stalled.

Expedia in demand

Expedia’s 0% convertibles due 2026 were the investment-grade issue of the day with the notes stronger in active trade.

The 0% notes gained about 0.75 point outright.

They were changing hands in the 88.875 to 89.125 context throughout the session.

The yield was about 4%.

While the yield was not overly attractive, the notes have price appreciation potential with outright accounts active buyers on Tuesday, sources said.

There was about $25 million in reported volume.

Expedia’s stock traded to a low of $91.10 and a high of $93.19 before closing at $93.04, an increase of 2.55%.

Radius active

Radius’ 2.5% convertible notes due 2026 saw a flurry of activity early Tuesday although with little movement in price as law firms announced an investigation of the company’s acquisition.

The 2.5% convertible notes remained on a 97-handle and were wrapped around 97.5 in early trade, according to a market source.

While active early, activity in the name petered out as the session progressed.

There was $6 million in reported volume.

Radius’ stock traded to a low of $14.56 and a high of $14.60 before closing at $14.57, off 0.34%.

Radius’ 2.5% convertible notes jumped 10 points to a 97-handle on March 1 after the company announced that EQT and the Public Sector Pension Investment Board would take the company private in a $3 billion deal.

The deal is expected to close in the third quarter.

Law firms Monteverde & Associates and Kaskela Law LLC announced an investigation into the merger on Tuesday.

While the announcement may have sparked some activity in the issue, the notes were unchanged with little concern that the deal was in jeopardy.

“These things are common,” a source said.

SmileDirectClub talks

SmileDirectClub’s deeply distressed 0% convertible notes due 2026 sank to a new low on Tuesday on news the company’s efforts to negotiate a distressed debt exchange had stalled.

The 0% notes sank 5 points outright to a 10-handle, a source said.

The notes were marked at 15 prior to the news.

SmileDirectClub was negotiating an exchange with holders of the 0% notes for straight debt with term sheets developed.

However, news recently broke that those negotiations had stalled, a source said.

SmileDirectClub’s stock closed Tuesday at 39 cents, a decrease of 0.33%.

The 0% notes have long been in distressed territory with the notes trading below 20 since May 2022, according to Trace data.

The company was issued a delisting notification in November 2022 and has until May 17 to regain compliance.

Mentioned in this article:

Expedia Inc. Nasdaq: EXPE

LivePerson Inc. Nasdaq: LPSN

Radius Global Infrastructure Inc. Nasdaq: RADI

SmileDirectClub Inc. Nasdaq: SDC

Upwork Inc. Nasdaq: UPWK

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