Travere Therapeutics eyed; Southwest, American Airlines improve; Mandiant notes active

By Abigail W. Adams

Portland, Me., March 8 – The convertibles primary market saw some action on Tuesday with one new offering on deck.

Travere Therapeutics Inc. plans to price $250 million of seven-year convertible notes after the market close on Tuesday in a Securities and Exchange Commission-registered offering.

The small offering looked cheap based on underwriters’ assumptions, but the deal was heard to be wall-crossed.

Meanwhile, there was an uptick of activity in the convertibles secondary space on Tuesday as equity markets continued to be whipsawed by geopolitical headlines and surging crude oil futures.

Indexes wavered between large gains and losses before closing the day mixed.

The Dow Jones industrial average closed the day down 185 points, or 0.56%, the S&P 500 index closed down 0.72% and the Nasdaq Composite closed down 0.28%.

However, the Russell 2000 index closed up 0.60%.

The convertible notes of airlines firmed on Tuesday after getting clobbered the past few sessions.

Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) were the most actively traded issue during Tuesday’s session with the notes gaining alongside stock.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 regained some ground from Monday’s sell-off.

Mandiant Inc.’s 0.875% convertible notes due 2024 were active and making large gains outright but contracting dollar-neutral following news Google would buy the former FireEye unit.

Travere in focus

Travere plans to price $250 million of seven-year convertible notes after the market close with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of 550 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk, a source said.

However, the small offering was heard to be wall-crossed. Books closed in the early afternoon.

Proceeds from the new offering will be used to repurchase for cash a portion of its outstanding 2.5% convertible notes due 2025 in privately negotiated transactions.

There is $276 million outstanding of the 2.5% notes, which the company priced at par in 2018 under its former name Retrophin Inc.

The 2.5% notes were changing hands around 103.5 on Tuesday, a source said.

Airlines firm

The convertible notes of airlines firmed in the secondary space on Tuesday after getting clobbered in previous sessions amid surging crude oil futures.

Southwest’s 1.25% convertibles due 2025 were the most actively traded issue in the secondary space with the notes gaining alongside stock.

The 1.25% notes rose about 5 points outright with stock up almost 6%.

The 1.25% notes were changing hands at 126.625 in the late afternoon.

There was $30 million in reported volume.

Southwest’s stock traded to a low of $36.85 and a high of $40.76 before closing the day at $39.19, an increase of 5.38%.

Southwest’s 1.25% convertible notes were the only ones to hold on a dollar-neutral basis amid the downturn in equity, a source said.

American Airlines’ 6.5% convertible notes due 2025 firmed dollar-neutral as stock recovered.

The 6.5% convertible notes gained 5 points outright with stock up more than 5%.

The notes were changing hands at 117.5 versus a stock price of $14.14 in the late afternoon, according to a market source.

There was $11.5 million in reported volume.

American Airlines’ stock traded to a low of $12.45 and a high of $14.27 before closing the day at $13.55, an increase of 5.57%.

The notes contracted 2 points dollar-neutral in Monday’s sell-off.

Mandiant’s buyout

Mandiant’s 0.875% convertible notes due 2024 were making large gains on an outright basis but contracting dollar-neutral following news Google would acquire the cyber-security company in an all-cash transaction valued at $5.4 billion.

The 0.875% notes jumped about 10 points outright on the news.

They were changing hands at 110.625 in the late afternoon.

However, the notes contracted about 0.5 point dollar-neutral, a source said.

Mandiant’s stock was down 2% to close the day at $22.04.

However, the notes were trading up to their takeout price, a source said.

The notes had previously taken a hit on rumors that Microsoft was considering making a bid for the company, a source said.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

Mandiant Inc. Nasdaq: MNDT

Southwest Airlines Co. NYSE: LUV

Travere Therapeutics Inc. Nasdaq: TVTX

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