PPL convertibles hit recent high; Southern Co., Alliant gain; DISH under pressure

By Abigail W. Adams

Portland, Me., March 27 – The convertibles primary market remained dormant on Monday although sources are hopeful some deal making will transpire before the final trading week of the quarter comes to a close.

New deal activity was expected the previous week; however, volatility in markets may have kept potential issuers at bay.

Meanwhile, the secondary space launched the final trading week of the quarter quietly albeit with an improved tone.

News of First Citizens Bancshares’ acquisition of Silicon Valley Bank sparked a rebound in bank sector stocks and helped lift investor sentiment.

However, uncertainty remained with the bond market and the Federal Reserve at odds over economic projections and the trajectory of rates.

Equity indexes launched Monday’s session strong but turned mixed as the session progressed with the Nasdaq Composite index falling into negative territory.

The Dow Jones industrial average closed up 195 points, or 0.6%, the S&P 500 index closed up 0.16%, the Nasdaq Composite index closed down 0.47% and the Russell 2000 index closed up 1.08%.

There was $41 million in reported volume about one hour into the session and $337 million on the tape about one hour before the market close.

Investment-grade issues continued to drive activity in the space with buyers bidding up the notes.

PPL Capital Funding Inc.’s 2.875% convertible notes due 2028 (Baa1/BBB+) saw the heaviest volume of Monday’s session with the notes trading up to a recent high.

Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) and Alliant Energy Corp.’s 3.875% convertible notes due 2026 (BBB+) also continued to improve in active trade.

DISH Network Corp.’s convertible notes (B3/CCC) saw heavy selling on Monday with market players speculating a restructuring may be on the horizon.

IG gains

Investment-grade convertible notes continued to dominate trading activity on Monday with the slate of IG issuance in 2023 remaining sought after.

PPL’s 2.875% convertible notes due 2028, the laggard of the recent IG deals, were in focus on Monday with the notes trading up to a recent high.

The 2.875% notes rose about 0.5 point outright.

The notes were changing hands in the 98.875 to 99.375 context throughout the session.

They were seen at 99 versus a stock price of $27.08 in the late afternoon, according to a market source.

There was $45 million in reported volume.

PPL’s stock traded to a low of $26.86 and a high of $27.17 before closing at $26.96, an increase of 0.67%.

PPL’s 2.875% convertible notes due 2028 were the first of a wave of three investment-grade convertible notes to price in late February.

The $1 billion issue, which priced at par on Feb. 21, initially played to strong demand and was well received on its aftermarket debut.

However, the deluge of investment-grade issuance and the shockwaves in financial markets following Silicon Valley Bank’s collapse sent the notes spiraling down to a 96-handle.

PPL’s 2.875% convertible notes have been the underperformer of the recent IG issuance, which sources attributed to their low coupon and longer duration.

However, the notes have been on a strong uptrend since last week with the widening of credit spreads making the paper more attractive.

PPL’s trading level on Monday was its highest outright level since February.

Southern Co.’s 3.875% convertible notes due 2025 remained well bid on Monday, sources said.

The 3.875% notes were trading at 101.25 versus a stock price of $68.64 in the late afternoon.

There was $27 million in reported volume.

Southern Co.’s stock traded to a low of $68.05 and a high of $69.13 before closing at $68.24, down 0.51%.

Alliant Energy’s 3.875% convertible notes due 2026 were changing hands at 102 versus a stock price of $51.95 in the late afternoon.

There was $7 million in reported volume.

Alliant Energy’s stock traded to a low of $51.20 and a high of $52.48 before closing at $51.32, a decrease of 0.98%.

DISH under pressure

DISH’s convertible notes saw heavy selling on Monday as market players speculate the company may need to restructure to meet its short-term maturities.

DISH’s 0% convertible notes due 2025 hit a new all-time low in heavy volume.

The notes sank 0.5 point.

They were trading at 52.25 versus a stock price of $8.68 in the late afternoon, according to a market source.

The yield was above 25%.

There was $13 million in reported volume.

DISH’s 3.375% convertible notes due 2026 broke also hit a new all-time low with the notes breaking below a 50-handle.

The 3.375% notes traded as low as 49.5 in the late afternoon but pared its losses into the close.

The notes were seen at 50.625 versus a stock price of $8.64 in the late afternoon.

The yield was about 26.25%.

There was $6 million in reported volume.

DISH’s soon-to-mature 2.375% convertible notes due March 15, 2024 fell more than 1 point.

The notes were trading at 86 versus a stock price of $8.71 in the late afternoon.

The yield jumped to 19%.

DISH’s stock traded to a low of $8.52 and a high of $8.78 before closing at $8.60, off 1.71%.

DISH’s capital structure has been under pressure since a ransomware attack on Feb. 23, the same day fourth-quarter earnings were announced, causing weeks long outages for some customers, from which the company is still reeling.

The attack is expected to result in a significant loss of subscribers with forecasts for fourth-quarter earnings not good, sources said.

Sources have long speculated about how DISH will handle its looming maturities with $1 billion of its 2.375% convertible notes due March 15, 2024 and $2 billion of its 5 7/8% senior notes due Nov. 15, 2024 outstanding.

Sources are now speculating that the company will have to undergo a restructuring.

Mentioned in this article:

Alliant Energy Corp. Nasdaq: LNT

DISH Network Corp. Nasdaq: DISH

PPL Capital Funding Inc. NYSE: PPL

Southern Co. NYSE: SO

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