Rivian reopens convertibles primary; Duke Energy, CMS Energy, Southern Co. notes gain

By Abigail W. Adams

Portland, Me., Oct. 4 – The convertibles primary market reopened on Wednesday with one large offering on deck.

Rivian Automotive Inc. plans to price a $1.5 billion offering of seven-year green convertible notes after the market close on Thursday with price talk for a coupon of 3.125% to 3.625% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Morgan Stanley & Co. LLC is lead left bookrunner for the Rule 144A offering, which carries a greenshoe of $225 million.

Meanwhile, it was a slow session in the convertibles secondary space with the market unchanged on a volatile day for equities.

Equity indexes launched the day strong on the heels of the latest ADP Employment Report, which painted a different picture of the labor market than Tuesday’s JOLTS report, which rattled markets.

While selling in Treasuries subsided after payroll growth slowed more sharply than expected, equity indexes gave up their early gains to turn mixed as the session progressed.

They saw a heavy bought of selling mid-way through the session but buyers emerged late in the session to lift indexes back into positive territory by the close.

The Dow Jones industrial average closed Wednesday up 127 points, or 0.39%, the S&P 500 index closed up 0.81%, the Nasdaq Composite index closed up 1.35% and the Russell 2000 index closed up 0.11%.

“It’s been topsy-turvy but there’s nothing really going on,” a source said.

There was $80 million in reported convertibles trading volume about one hour into the session and $354 million about one hour before the market close.

The market remained liquid with bids available and merchandise movable albeit at about a 0.5 point discount, a source said.

However, sellers were holding out with only small amounts moving closer to current market levels.

High-grade names continued to dominate the tape with several names improved as investors looked to safe havens amid uncertain market conditions.

Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB), Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) and CMS Energy Corp.’s 3.375% convertible notes due 2028 (Baa2) saw heavy volume during Wednesday’s session.

Liberty Media Corp.’s recently priced 2.375% exchangeable notes for Live Nation Entertainment Inc.’s stock were weaker in active trade.

Exact Sciences Corp.’s 2% convertible notes due 2030 were active early in the session although activity in the name petered out as the session progressed.

High-grade trades

High-grade names continued to dominate the tape on Wednesday with several names improved as investors seek safe havens.

Duke Energy’s 4.125% convertible notes due 2026 inched up about 0.25 point outright as stock wavered between gains and losses.

The notes were changing hands at 96.75 versus a stock price of $86.09 early in the session and 96.875 in the late afternoon.

The yield was about 5.5%.

There was $13 million in reported volume.

Duke Energy’s stock traded to a low of $84.87 and a high of $86.41 before closing at $86.12, a gain of 0.48%.

Duke Energy’s convertible notes have held up well amid the pressure in markets with the company a large market cap with a triple B credit rating.

“They’re pretty safe to be in,” a source said.

CMS Energy’s 3.375% convertible notes due 2028 also notched nominal gains in heavy volume.

The notes were up about 0.375 point outright as stock wavered between gains and losses. They were changing hands at 93.375 versus a stock price of $52.10 in the late afternoon.

The yield was just shy of 5%.

There was $20 million in reported volume.

CMS Energy’s stock traded to a low of $51.13 and a high of $52.42 before closing at $52.28, up 0.79%.

Southern Co.’s 3.875% notes due 2025 were up about 0.25 point outright as stock wavered between gains and losses. The notes were seen at 97.375 versus a stock price of $64.32 in the late afternoon.

There was $13 million in reported volume.

Southern Co.’s stock traded between $63.36 and $64.73 before closing at $64.59, up 0.92%.

While rates have jumped dramatically in the past two weeks, investment-grade spreads have held up well with spreads widening only 7 basis points compared to high-grade spreads widening 45 bps, a source said.

“Safety, safety, safety,” a source said.

Liberty Media weaker

Liberty Media’s 2.375% exchangeable notes for Live Nation shares were weaker in active trade on Wednesday.

The notes fell about 0.75 point outright with stock in the green for the majority of the session.

The 2.375% convertible notes were trading at 99.5 versus a stock price of $83.53 in the late afternoon.

There was $9 million in reported volume.

Live Nation’s stock traded to a low of $82.40 and a high of $84.25 before closing at $84.11, an increase of 1.47%.

Exact Sciences active early

Exact Sciences’ 2% convertible notes due 2030 improved in active trade early in the session although activity in the name petered out later.

The 2% notes were seen at 107.25 versus a stock price of $65.19 shortly before 11 a.m. ET, according to a market source.

There was $4 million in reported volume.

Exact Sciences’ stock traded to a low of $64.73 and a high of $65.66 before closing at $65.05, off 0.84%.

The company’s stock has been under pressure since its second-quarter earnings report on Aug. 1 with stock off 40%.

The 2% convertible notes also tumbled with the notes trading on a 140 handle heading into earnings, a source said.

News that the company is preparing for a major expansion in the Pheonix area with the Phoenix City Council set to vote on a development agreement on Wednesday may have sparked some interest in the name, a source said.

Mentioned in this article:

CMS Energy Corp. NYSE: CMS

Duke Energy Corp. NYSE: DUK

Exact Sciences Corp. Nasdaq: EXAS

Live Nation Entertainment Inc. NYSE: LYV

Southern Co. NYSE: SO

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.