Spirit AeroSystems on deck; TransMedics, Datadog convertible notes surge post-earnings

By Abigail W. Adams

Portland, Me., Nov. 7 – The convertibles primary market returned to action on Tuesday with one new offering on deck.

Serial high-yield issuer Spirit AeroSystems Inc. is making its debut appearance in the convertibles market with a $200 million offering of five-year exchangeable notes that is slated to price after the market close on Wednesday.

The notes are talked with a coupon of 3.25% to 3.75% and an initial exchange premium of 27.5% to 32.5%, according to a market source.

Morgan Stanley & Co. LLC (lead left), Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, BofA Securities Inc. and Citigroup Global Markets Inc. are bookrunners for the Rule 144A offering, which carries a greenshoe of $30 million.

Meanwhile, the secondary space saw an active session with earnings-related volatility continuing to spark outsized moves in outstanding issues.

Equity indexes were again mixed on Tuesday as markets continued to take a break from the post-Fed rally of late last week.

The Dow Jones industrial average closed the session up 57 points, or 0.17%, the S&P 500 index closed up 0.28%, the Nasdaq Composite index closed up 0.90% and the Russell 2000 index closed down 0.28%.

TransMedics Group Inc.’s 1.5% convertible notes due 2028 surged on Tuesday as stock added more than 50% on the heels of a large earnings beat.

Datadog Inc.’s 0.125% convertible notes due 2025 also made large outright and dollar-neutral gains after a large earnings beat and raised guidance.

DISH Network Corp.’s convertible notes (Caa2/CCC-) were mixed after the destruction of the previous session.

However, the company’s abysmal earnings have market players questioning the ability of the company to pay off its soon-to-mature 2.375% convertible notes due March 15, 2024.

“That’s in four months,” a source said.

TransMedics outperforms

TransMedics’ 1.5% convertible notes due 2028 surged in heavy volume as stock added more than 50% post-earnings.

The 1.5% convertible notes jumped 16 points outright in heavy volume.

The notes were changing hands at 97.75 versus a stock price of $59.45 early in the session.

They were trading at 96.25 in the late afternoon.

The notes expanded 2.5 points dollar-neutral on the move up, a source said.

There was $13 in reported volume.

TransMedics’ stock traded to a low of $56.81 and a high of $68.47 before closing at $60.76, an increase of 51.18%.

Stock surged after the medical technology company posted a surprise profit.

The company reported earnings per share of 7 cents versus analyst expectations for losses per share of 12 cents.

Revenue was $66.43 million versus analyst expectations for revenue of $53.22 million.

Datadog surges

Datadog’s 0.125% convertible notes due 2025 also made large outright and dollar-neutral gains after a large earnings beat.

The 0.125% notes jumped 16 points outright with stock up almost 30%.

The notes were trading at 125.5 versus a stock price of $102.66 early in the session, according to a market source.

They were changing hands at 125.875 in the late afternoon.

There was $34 million in reported volume.

Datadog’s stock traded to a low of $96.17 and a high of $104.43 before closing at $102.20, an increase of 28.47%.

Stock surged after the cybersecurity company posted a large earnings beat.

Datadog reported earnings per share of 45 cents versus the 34 cents expected.

Revenue was $547.54 million versus the $524.2 million expected.

The company also surpassed expectations with its fourth-quarter guidance of $564 million to $568 million.

DISH levels off

DISH’s convertible notes were mixed after the destruction of the previous session although market players continued to question the company’s viability.

The satellite broadcaster’s 2.375% convertible notes due March 15, 2024 continued to plunge.

The notes sank another 2.5 points outright.

They were trading at 92.5 with a yield of 25.625% about one hour into the session.

The notes were wrapped around 93 with a yield of 24% heading into the market close.

There was $16 million in reported volume.

While the notes have taken a hit since DISH reported earnings, sources were surprised the trading level was in the 90s given the fundamentals of the company.

The 2.375% convertible notes have about $1 billion outstanding.

The company has about $1 billion on its balance sheet and $8 billion in looming maturities.

“There is no way they’re going to be able to pay this off,” a source said. “This should be trading for pennies.”

DISH’s 0% convertible notes due 2025 sank another 2 points outright.

The notes were changing hands at 51.75 with a yield of 34% early in the session.

The notes were seen in the 51.5 to 52 context heading into the market close.

There was $24 million in reported volume.

The 3.375% convertible notes due 2026 were off about 0.5 point outright early in the session but closed with gains.

The 3.375% notes were changing hands at 42.75 with a yield of 39% shortly before 11 a.m. ET.

However, they were lifted about 1 point and trading in the 43.5 to 44 context heading into the market close with the yield falling to about 38.125%, sources said.

There was $9 million in reported volume.

DISH’s convertible notes are not equity sensitive.

However, stock recovered from its historic plummet the previous session to close at $3.52, up 2.33%.

Mentioned in this article:

Datadog Inc. Nasdaq: DDOG

DISH Network Corp. Nasdaq: DISH

Spirit AeroSystems Inc. NYSE: SPR

TransMedics Group Inc. Nasdaq: TMDX

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