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Morning Commentary: ZTO convertibles hit the aftermarket, gain outright, flat on swap
By Abigail W. Adams
Portland, Me., Aug. 25 – It was an active morning in the convertibles secondary space on Thursday as the second largest offering of the month made its aftermarket debut.
ZTO Express priced $870 million of five-year convertible notes after the market close on Wednesday at par at the cheap end of talk with a coupon of 1.5% and an initial conversion premium of 30%.
Price talk was for a coupon of 1% to 1.5% and an initial conversion premium of 30% to 35%.
The new paper from the Shanghai-based delivery service hit the secondary space on a strong day for equities as markets expressed optimism ahead of Federal Reserve chair Jerome Powell’s Friday speech at the Jackson Hole Symposium.
Wednesday also marked a particularly strong session for the ADR space following a Wall Street Journal report the U.S. and China were nearing an agreement on audits that would prevent more than 200 companies from delisting.
The Dow Jones industrial average was up 98 points, or 0.29%, the S&P 500 index was up 0.73%, the Nasdaq Composite index was up 0.91% and the Russell 2000 index was up 0.93% shortly before 11 a.m. ET.
While ZTO’s new convertible notes were making gains on an outright basis alongside the company’s equity, they were flat dollar-neutral, sources said.
The 1.5% notes were changing hands at 102.25 versus a stock price of $24.92 early in the session.
The new paper dominated activity in the secondary space with $80 million in reported volume – more than half of the $138 million on the tape about one hour into the session.
ZTO’s American Depositary Shares were seen at $25.20, an increase of 3.66%, shortly before 11 a.m. ET.
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