Helix Energy refinances convertibles via junk bonds; Halozyme rises; Spirit Air rebounds

By Abigail W. Adams

Portland, Me., Nov. 15 – The convertibles primary market remained dormant on Wednesday with expectations for new deal activity diminishing.

In a disappointing move for what sources had hoped to become a growing trend, Helix Energy Solutions Group, Inc. opted to refinance its convertible debt via a junk bond offering.

Helix is marketing a $300 million offering of senior notes due 2029 (B1//BB-) with proceeds to be used to retire the company’s deep-in-the-money 6.75% convertible senior notes due 2026.

Sources had hoped traditional junk bond issuers would turn to the convertibles market for refinancing needs amid the high-rate environment.

While there have been crossover issuers from the junk market, Spirit AeroSystems, Inc. being the most recent example, the volume of crossover issuance expected never materialized.

The road between the high-yield and convertibles market was also more of a two-way street than anticipated with RingCentral Inc. pricing a $400 million issue of 8½% senior notes due 2030 (B1/BB/BB) at par in August to repurchase a portion of its 0% convertible senior notes due 2025 and 0% convertible senior notes due 2026.

Meanwhile, the secondary space remained active early Wednesday as buyers continued to return to the market on the heels of macro data pointing to an end to rate hikes.

Equity indexes extended their gains despite a pullback in Treasuries.

The Dow Jones industrial average closed Wednesday up 164 points, or 0.47%, the S&P 500 index closed up 0.16%, the Nasdaq Composite index closed up 0.07% and the Russell 2000 index closed up 0.16%.

The Producer Price Index report released pre-open continued to reflect easing inflation, adding fuel to the post-CPI rally of the previous session.

However, retail sales also slowed, calling into question the strength of the consumer-powered economy.

While there is disparity in the amount expected, analysts are now widely calling for rate cuts in 2024.

However, the rate cuts may not be the good news the market expects but the product of a serious economic downturn, sources warned.

While market players were beginning to turn an eye to 2024, the exuberance of cooling inflation continued to lift the convertibles secondary space.

There was $120 million in reported convertible bond trading volume about one hour into the session and $558 million on the tape about one hour before the market close with names across the board continuing to improve.

Halozyme Therapeutics Inc.’s 1% convertible notes due 2028 made large gains in active trade as stock continued to ride an uptrend sparked by positive earnings.

Spirit Airlines Inc.’s 1% convertible notes due 2026 also continued to rebound amid improved market conditions.

Halozyme rises

Halozyme Therapeutics 1% convertible notes due 2028 made large gains in active trade on Wednesday in a delayed reaction to the large stock move of the previous session.

The 1% notes added 2 points outright.

They were changing hands at 95.375 versus a stock price of $39.75 early in the session, according to a market source.

They were trading at 96 versus a stock price of $40.41 in the late afternoon.

There was $12 million in reported volume.

Halozyme’s stock traded to a high of $41 and a low of $39.22 before closing at $39.34, down 2.36%.

While stock fell into the red on Wednesday, Halozyme’s stock is still up about 5% on the week with Tuesday’s hot market conditions accelerating an uptrend sparked by positive earnings the previous week.

Spirit rebounds

Spirit Airlines’ 1% convertible notes due 2026 continued to rebound amid improved market conditions.

The 1% notes jumped 3 points outright.

The notes were trading at 51.5 with a yield of about 30% early in the session.

They remained wrapped around 51.5 in the late afternoon.

There was $8 million in reported volume.

While not equity sensitive, Spirit Airlines’ stock was strong on Wednesday and closed at $11.20, an increase of 12.56%.

The 1% notes have made large gains over the past three sessions after closing out last week at an all-time low of 43.625.

Spirit Airlines’ 1% convertible notes have seen heavy selling pressure throughout November.

Regional airlines, in general, have been in the crosshairs of investors with earnings across the sector raising red flags for the industry.

Decreased expectations for the completion of JetBlue’s acquisition of Spirit sparked a fire sale in the name.

The 1% convertible notes were trading in the low 70s in late October.

Mentioned in this article:

Halozyme Therapeutics Inc. Nasdaq: HALO

Helix Energy Solutions Group, Inc. NYSE: HLX

RingCentral Inc. NYSE: RNG

Spirit AeroSystems, Inc. NYSE: SPR

Spirit Airlines Inc. NYSE: SAVE

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