Spirit Airlines convertibles expand on debut; Snap improves; Ford drops below par

By Abigail W. Adams

Portland, Me., April 29 – New convertible paper was in focus on Thursday as the second and likely final new deal of the week hit the secondary space.

Spirit Airlines Inc.’s new offering was putting in a strong performance in the secondary space with the notes trading up on an outright and dollar-neutral basis, although they were coming in from the heights reached shortly after the opening bell.

The new paper came as volatility returned to equity markets with the strong start benchmarks saw at the open quickly descending into a sell-off as better-than-expected economic data and rising 10-year Treasury yields again shook the high-flyers in the tech sector.

While each benchmark drifted into negative territory in intraday activity, they closed the day with gains with the Dow Jones industrial average up 239.98 points, or 0.71%, the S&P 500 up 0.68% and the Nasdaq Composite up 0.22%.

It was a “mixed bag” in the secondary space with weakness in some pockets, while others performed well, a source said.

Snap Inc.’s newly priced 0% convertible notes due 2027 remained active with the notes continuing to improve.

While Ford Motor Co.’s 0% convertible notes due 2026 were trading off on an outright basis as stock tanked post-earnings, the notes improved dollar-neutral.

Spirit Airlines trades up

Spirit Airlines priced $440 million of five-year convertible notes on Wednesday at par with a coupon of 1% and an initial conversion premium of 40%.

Pricing came at the rich end of talk for a coupon of 1% to 1.5% and the midpoint of talk for an initial conversion premium of 37.5% to 42.5%, according to a market source.

The new paper was in focus in the secondary space and trading up on an outright and dollar-neutral, or hedged, basis.

The 1% notes traded as high as 104 shortly after the opening bell as buyers clambered to increase their positions in the name.

However, the notes came in as the market turned.

They were changing hands between 102.25 and 103.25 about one hour after the opening bell.

They continued to trade around 102.5 in the late afternoon.

The notes expanded upwards of 2 points dollar-neutral, a source said.

Spirit Airlines’ stock traded to a high of $36.25 and a low of $35.22 before closing the day at $35.64, an increase of 1.63%.

Concurrently with the new offering, the Miramar, Fla.-based airline priced 10,594,073 shares of common stock at an offering price of $35.05 per share.

Proceeds from the convertible notes offering were used to repurchase $146.8 million of the company’s 4.75% convertible notes for $440.7 million in cash.

Snap gains continue

Snap’s 0% convertible notes due 2027 remained active their second day in the secondary space with the notes continuing to improve.

The 0% notes were marked at 102.75 bid, 103.25 offered early in Thursday’s session and were up about 0.5 point to 0.75 point dollar-neutral, a source said.

However, they came in alongside the broader market and were changing hands at 102.5 in the late afternoon.

While the notes gave back some gains, they remained expanded about 0.25 point, a source said.

Snap’s stock traded to a low of $60.58 and a high of $64.25 before closing the day at $62.28, an increase of 0.27%.

Ford below par

Ford’s 0% convertible notes due 2026 returned to focus on Thursday with the notes dropping back below par but expanding on the move down.

The 0% convertible notes dropped 4 points outright as stock tanked more than 9% following the company’s earnings report.

The 0% notes returned to a 98-handle and were changing hands in the 98 to 98.5 context throughout the session.

However, the notes improved about 0.375 point to 0.5 point dollar-neutral, sources said.

Ford’s stock traded to a high of $11.91 and a low of $11.14 before closing the day at $11.26, a decrease of 9.49%.

Stock tanked after the automotive company reported first-quarter earnings.

While the company beat on both the top and bottom line, stock traded off on weak guidance, which was attributed to the global semiconductor chip shortage.

Ford crushed analyst expectations with earnings per share of 89 cents versus expectations for earnings per share of 21 cents.

Revenue of $33.55 billion also beat expectations for revenue of $32.23 billion.

However, the company also slashed guidance to $5.5 billion to $6.5 billion from the previous $8 billion to $9 billion, CNBC reported.

Mentioned in this article:

Ford Motor Co. NYSE: F

Snap Inc. NYSE: SNAP

Spirit Airlines Inc. NYSE: SAVE

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