Twitter convertible notes in focus following junk bond pricing; Caesars, Intel active

By Abigail W. Adams

Portland, Me., Dec. 6 – The convertible secondary space returned to a regular pace on Friday with activity surrounding new paper from Allscripts Healthcare Solutions, Inc. waning.

Friday was a strong day for equities following a better-than-expected jobs report.

However, there appeared to be more trading of stocks than convertibles when it came to positions, a market source said.

The calm that has pervaded the secondary space is expected to continue through the close of the year.

Accounts may be cautious of engaging in too much buying or selling in an effort to hold on to their returns, a source said.

While few names saw concentrated trading activity on Friday, one name stood out for high-volume. And that name was Twitter Inc.

Twitter’s 1% convertible notes due 2021 were among the most actively traded issue in the secondary space following the social media company’s debut appearance in junkbondland.

Intel Corp.’s 3.25% convertible notes due 2039 also continued to be actively traded as it has been since the company announced it was calling the notes.

Caesars Entertainment Corp.’s 5% convertible notes due 2024 also saw a fresh round of activity with the equity sensitive convertible notes making gains alongside stock following an asset sale.

Twitter in focus

Twitter’s 1% convertible notes due 2021 were among the most actively traded issues in the secondary space, although some sources were scratching their heads over the activity.

The 1% convertible notes were trading largely flat at 97.375 versus a stock price of $30.07.

The bonds saw about $15 million in reported volume and about $51 million in estimated volume with more buyers in the market than sellers, sources said.

Twitter stock traded as low as $29.98 and as high as $30.47 before closing the day at $30.19, an increase of 0.5%.

With a yield to maturity of 1.5% and a conversion premium of over 150%, some were mystified about the demand for the notes.

The activity in the 1% convertible notes was attributed to Twitter’s newly priced junk bond.

The credit rating given to Twitter’s junk bonds may have increased the attractiveness of its convertibles, a source said.

In a deal that was heard to be as much as 4x oversubscribed, Twitter priced an upsized $700 million issue of non-convertible eight-year senior bullet notes at par to yield 3 7/8% on Thursday.

The deal was one of the most tightly priced high-yield deals of 2019 with only a few achieving a 3-handle, according to Prospect News data.

Moody’s Investors Service assigned a Ba2 rating and S&P Global Ratings a BB+ rating to Twitter’s notes.

Some may have felt more comfortable with the credit given the ratings and were “putting it on outright and waiting for the stock to rip,” a market source said.

Twitter’s high-yield deal was an opportunistic capital raise with proceeds earmarked for general corporate purposes.

With the maturity of the 1% notes looming, there is speculation the company may decide to apply some of the proceeds from the high-yield bonds to retire the convertible notes, a market source said.

Intel active

Intel’s 3.25% convertible notes due 2039 remained a major volume mover in the secondary space as the notes’ call date approaches.

The 3.25% notes were changing hands at $281.25 versus a stock price of $56.83, according to a market source.

The bonds saw more than $23.5 million in reported volume during Friday’s session.

The activity in the notes was “end of life trades,” with some selling to raise cash, sources said.

The 3.25% notes are expected to remain active until they are redeemed.

The 3.25% notes will be redeemed on Jan. 9 at par plus accrued interest but are convertible anytime before the close of business on Jan. 6.

Caesars’ sale

Caesars’ 5% convertible notes due 2024 were active, with the notes gaining outright alongside stock following an asset sale.

The 5% notes were up about 1.5 points outright to 184.4 versus an equity price of $13.03.

The notes are equity-sensitive and were moving in tandem with stock, a source said.

Caesars’ stock traded to a low of $12.90 before closing the day near its intra-day high of $13.04, an increase of 1.24%.

Stock saw above average trading volume during Friday’s session with 11 million changing hands versus the 9 million 50-day average.

Stock was posting gains after Caesars announced it had completed the sale of its Rio All-Suite Hotel & Casino to Dreamscape for $516.3 million.

Allscripts day two

After dominating activity during Thursday’s session, Allscripts’ newly priced 0.875% convertible notes due 2027 were quiet during Friday’s session.

There were only a few prints on the tape by late Friday afternoon with the notes remaining just above par, according to a market source.

Allscripts stock closed Friday at $10.06, an increase of 0.4%.

The 0.875% notes have traded in a tight range between par and 100.25 since hitting the secondary space on Thursday.

The health care technology company priced a $200 million issue of the 0.875% notes after the market close on Wednesday.

Mentioned in this article:

Allscripts Healthcare Solutions, Inc. Nasdaq: MDRX

Caesars Entertainment Corp. Nasdaq: CZR

Intel Corp. Nasdaq: INTC

Twitter Inc. NYSE: TWTR

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