Convertibles secondary flat on volatile day for equities; NextEra improves; NIO active

By Abigail W. Adams

Portland, Me., Sept. 29 – The convertibles secondary space closed the third quarter largely unchanged after a volatile session for equities.

Equity indexes launched Friday strong following the latest Personal Consumption Expenditure report, which reflected a slower pace of inflation than expected.

However, the looming U.S. federal government shutdown dampened the early exuberance with indexes dropping into negative territory mid-session before closing the day mixed.

The Dow Jones industrial average closed Friday down 159 points, or 0.47%, the S&P 500 index closed down 0.27%, the Nasdaq Composite index closed up 0.14% and the Russell 2000 index closed down 0.51%.

The secondary space was quiet amid the volatility with $63 million in reported convertibles trading volume about one hour into the session and $389 million on the tape about one hour before the market close.

CenterPoint Energy Inc.’s 4.25% convertible notes due 2026 (Baa2) saw heavy volume with little movement in price.

NextEra Energy Partners LP’s convertible notes continued to improve in active trade capping a week of strong gains on hedge.

NIO Inc.’s recently priced convertible notes also remained active as the company’s equity shrugged off a volatile week to add to the strong gains of the previous session.

CenterPoint active

CenterPoint’s 4.25% convertible notes due 2026 saw heavy volume on Friday although with little movement in price.

The 4.25% notes continued to trade on a 97-handle.

They were trading at 97.625 versus an equity price of $26.83 in the late afternoon, according to a market source.

There was $29 million in reported volume.

CenterPoint’s stock traded to a high of $27.16 and a low of $26.70 before closing at $26.85, up 0.52%.

NextEra caps strong week

NextEra’s convertible notes continued to improve in active trade on Friday capping a strong week for dollar-neutral gains.

NextEra’s notes were largely unchanged outright as losses continued to mount for the company’s stock.

The 2.5% convertible notes due 2026 were changing hands at 85.375 versus a stock price of $29.65 in the late afternoon, according to a market source.

There was $16 million in reported volume.

The 0% convertible notes due 2025 were changing hands at 83.625 versus a stock price of $29.64.

Both tranches have made large dollar-neutral gains as NextEra’s stock collapsed over the previous three sessions after slashing its dividend forecast.

NextEra’s stock traded to a high of $32.28 and a low of $29.02 before closing at $29.70, a decrease of 2.75%.

Stock has plunged 38% since Wednesday when the company announced it was reducing its growth expectations for dividends to 5% to 8% from 12%.

NIO active

NIO’s convertible notes remained active on Friday after a volatile week for the company’s American Depositary Shares.

The Shanghai-based electric vehicle maker’s 3.875% convertible notes due 2029 and 4.625% convertible notes due 2030 continued to move higher alongside its equity.

The 3.875% convertible notes were trading at 103.5 versus an equity price of $9.13 early in the session, a source said. They were marked at 102.875 versus an equity price of $8.94 in the late afternoon.

There was $8 million in reported volume.

The 4.625% convertible notes traded at 103.875 versus an equity price of $9.10 early in the session. They were trading at 104.25 versus a stock price of $9.05 in the late afternoon.

There was also $8 million in reported volume.

NIO’s ADS traded to a low of $8.86 and a high of $9.22 before closing the day at $9.04, an increase of 1.46%.

NIO’s equity has seen a volatile week with media reports of a potential $3 billion capital raise sparking heavy selling on Monday and reports of Mercedes taking a stake in the company sparking heavy buying on Thursday.

The ADSs are closing the week with a 6% gain.

NIO’s convertible notes have been unchanged to slightly stronger on hedge over the past two sessions, sources said.

Mentioned in this article:

CenterPoint Energy Inc. NYSE: CNP

NextEra Energy Partners LP NYSE: NEP

NIO Inc. Nasdaq: NIO

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