Travel names under pressure; Airbnb, Expedia, American Airlines fall; Lumentum contracts

By Abigail W. Adams

Portland, Me., March 7 – It was a red day in the convertibles secondary space on Monday as selling in equities intensified amid surging crude oil futures.

The Dow Jones industrial average closed the day down 740 points, or 2.2%, the S&P 500 index closed down 2.7%, the Nasdaq Composite closed down 3.62% and the Russell 2000 index closed down 2.48%.

“It is an ugly tape today,” a source said.

“You take your life in your hands trying to find the bottom in this market,” a source said.

While equity markets saw outsized moves to the downside, trading activity in the convertibles secondary space was relatively light.

There was $83 million in reported convertibles trading volume about one hour into the session and $500 million on the tape about one hour before the market close.

Travel names were in focus with the sector hard hit by the surge in crude oil futures with WTI crude oil futures trading as high as $130.50 during Monday’s session before settling at $119.78, an increase of $4.10 or 3.54%.

Expedia Inc.’s 0% convertible notes due 2026 (Baa3/BBB-/BBB-) were active with the notes moving lower on an outright basis although they continued to hold up well on hedge.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 fell on an outright and dollar-neutral basis.

Airbnb Inc.’s 0% convertible notes due 2026 sank further below par as stock gave back its post-earnings gains.

Outside of travel names, Lumentum Holdings Inc.’s 0.5% convertible notes due 2028 continued to struggle with the notes contracting dollar-neutral.

Expedia in focus

Expedia’s 0% convertible notes due 2026 were in focus on Monday with the notes continuing to move lower on an outright basis with stock under pressure alongside the broader travel sector.

The 0% convertible notes traded down about 2 points outright with stock off more than 10%.

They were changing hands at 114.5 versus a stock price of $162.34 in the late afternoon, according to a market source.

The notes were wrapped around 114 heading into the market close.

The notes were among the most actively traded names in the secondary space with $24 million in reported volume about one hour before the close.

The travel fare aggregator’s stock traded to a low of $156.14 and a high of $177.30 before closing the day at $157.01, a decrease of 10.91%.

Airbnb down

Airbnb’s 0% convertible notes due 2026 continued to lose ground in active trading on Monday.

The notes were down another 1.5 points outright with stock off more than 7%.

The notes were changing hands at 91.5 versus a stock price of $136.20 in the late afternoon, according to a market source.

There was $19 million in reported volume.

Airbnb’s stock traded to a low of $131.52 and a high of $145.27 before closing the day at $131.59, a decrease of 7.79%.

The 0% notes have given back all of their outright gains post-earnings when a better-than-expected report lifted stock.

The notes briefly traded above par in mid-February but have been on a downward trend since.

American Airlines ‘crushed’

American Airlines’ 6.5% convertible notes due 2025 sank on an outright and dollar-neutral basis on Monday as stock fell double digits.

The 6.5% convertible notes were off 6 points outright with stock down more than 10%.

The notes were changing hands at 115 versus a stock price of $13.47 in the late afternoon. They traded down to 112 as stock continued to get pummeled heading into the close.

The notes contracted 2 points dollar-neutral on the move down, a source said.

“They’re getting crushed,” a source said.

American Airlines’ stock traded to a high of $14.62 and a low of $12.77 before closing the day at $12.84, a decrease of 11.99%.

Airlines have been particularly hard hit by the rise in crude oil futures, sources said.

Lumentum day two

Lumentum’s new 0.5% convertible notes due 2028 continued to struggle their second day in the secondary space.

The 0.5% notes continued to trade on a 97-handle.

They were changing hands at 97.75 versus a stock price of $93.59 in the late afternoon.

The notes contracted 0.375 point to 0.5 point dollar-neutral, which wiped out Friday’s dollar-neutral expansion, a source said.

Lumentum’s stock traded to a low of $91.50 and a high of $94.63 before closing the day at $92.99, a decrease of 0.36%.

Lumentum priced a $750 million issue of the 0.5% convertible notes at par on Thursday.

While the notes sank on an outright basis and traded as low as 96.75 on their aftermarket debut on Friday, they expanded about 0.25 point dollar-neutral, sources said.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

American Airlines Group Inc. Nasdaq: AAL

Expedia Inc. Nasdaq: EXPE

Lumentum Holdings Inc. Nasdaq: LITE

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