Zendesk active; Carnival improves; Burlington gains outright, contracts dollar-neutral

By Abigail W. Adams

Portland, Me., Nov. 22 – It was an uneventful day in the convertibles secondary space on Tuesday with the market flat in thin volume.

“It’s getting quiet,” a source said.

Activity is expected to continue to wind down with few market players making moves during the holiday-shortened week.

Equity indexes wobbled between minor gains and losses early in the session but finished the day strong with the Dow Jones industrial average closing up 398 points, or 1.18%, the S&P 500 index up 1.36%, the Nasdaq Composite index up 1.36% and the Russell 2000 index up 1.16%.

There was $55 million in reported volume about one hour into the session and $338 million on the tape about one hour before the market close.

Zendesk Inc.’s convertible notes continued to see heavy volume following the completion of its acquisition by a consortium of private equity investors with the notes trading at their takeout prices.

Carnival Corp.’s recently priced 5.75% convertible notes due 2027 improved alongside stock in active trading although the notes remained well below par.

Burlington Stores Inc.’s 2.25% convertible notes due 2025 were the largest movers of the session with the notes making strong gains outright as stock surged post-earnings.

However, the notes contracted dollar-neutral on the move up, sources said.

Zendesk’s buyout

Zendesk’s convertible notes remained active with the notes trading up to their takeout price as stock ceased to trade with their buyout completed.

Zendesk’s 0.625% convertible notes due 2025 remained wrapped around 99.375 in heavy volume.

There was $16 million in reported volume, making the notes the most actively traded of Tuesday’s session.

The 0.25% convertible notes due 2023 continued to trade around 126.75.

The 0.625% convertible notes will be taken out at par, and the 0.25% convertible notes will be taken out according to the takeout matrix, sources said.

Zendesk formally announced private equity firms Permira and Hellman & Friedman LLC completed their acquisition of the company prior to the market open on Tuesday.

The $10.2 billion acquisition was announced in late June after widespread speculation.

Carnival improves

Carnival’s recently priced 5.75% convertible notes due 2027 improved in active trading on Tuesday, although the notes remain well below par.

The 5.75% notes rose about 0.5 point outright with stock up more than 1.5%.

The notes were changing hands at 97.75 versus a stock price of $9.43 in the late afternoon, according to a market source.

There was $12 million in reported volume.

Carnival’s stock traded to a high of $9.56 and a low of $9.18 before closing the day at $9.47, an increase of 1.72%.

Burlington active

Burlington Stores’ 2.25% convertible notes due 2025 were active as the retailer’s stock became the latest from the sector to surge post-earnings.

The 2.25% convertible notes climbed 5 points outright with stock up more than 20%.

The notes were changing hands at 110 versus a stock price of $187.79 in the late afternoon.

While the notes made strong gains outright, they contracted dollar-neutral on the move up, sources said.

Burlington’s stock traded to a low of $177.18 and a high of $192.32 before closing the day at $189.96, an increase of 20.46%.

The discount retailer reported earnings per share of 43 cents versus analyst expectations for earnings of 52 cents.

Revenue was $2.04 billion versus analyst expectations for revenue of $2.06 billion.

While the company missed expectations, stock surged after the company’s CEO unveiled a new strategy to move merchandise, which resulted in a rise in sales and provided upbeat 2023 guidance, MarketWatch reported.

Burlington is the latest in a chain of retailers that have bested expectations with earnings and forward guidance.

Mentioned in this article:

Burlington Stores Inc. NYSE: BURL

Carnival Corp. NYSE: CCL

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