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Morning Commentary: II-VI mandatories on deck; American Airlines convertibles climb
By Abigail W. Adams
Portland, Me., July 1 – While activity has been subdued in the convertibles market with the new issue pipeline slowing down, one deal is set to price after the market close.
II-VI Inc. will kick off the new month and the new quarter with its $400 million offering of series A mandatory convertible preferred stock.
The three-year par of $200 series A mandatory convertible preferred stock is set to price after the market close on Wednesday with price talk for a dividend of 5.75% to 6.25% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.
The deal was heard to be marketed with assumptions of 450 basis points over Libor and a 45% to 41% vol. skew, which modeled out to $208.42 at the midpoint of talk, a source said.
Meanwhile, activity continued to taper off in the convertibles secondary space with $34 million on the tape about one hour into the session.
American Airlines Group Inc.’s 6.5% convertible notes due 2025 accounted for almost one-third of the reported volume early in Wednesday’s session with the notes continuing to improve.
The notes traded up to par shortly after the opening bell but came in alongside stock.
The 6.5% notes were changing hands at 97.25 a little over one hour after the opening bell, according to a market source.
More than $9 million of the bonds were on the tape.
American Airlines stock traded as high as $14.28 shortly after the opening bell.
However, it quickly came in and was changing hands at $13.52, an increase of 3.21%, shortly before 11 a.m. ET.
Stock was posting gains after the company announced that flights would resume with seating at full capacity effective July 1.
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