Amphastar convertibles price, jump on secondary trading debut; Corporate Office lower

By Abigail W. Adams

Portland, Me., Sept. 13 – The convertibles primary market remained quiet on Wednesday with the window of opportunity for new issuance drawing to a close.

While the active pace of issuance expected did not transpire, the calendar remains robust with refinancings to continue to drive issuers to the market, sources said.

Meanwhile, it was an active day in the secondary space as the first new deal of the week made its aftermarket debut.

Amphastar Pharmaceuticals Inc. priced $300 million of long five-year convertible senior notes after the market close on Tuesday.

The new paper hit the secondary space as markets digested the latest Consumer Price Index report.

Equity indexes closed Wednesday mixed with the Dow Jones industrial average down 70 points, or 0.20%, the S&P 500 index up 0.12%, the Nasdaq Composite index up 0.29% and the Russell 2000 index down 0.78%.

The CPI report came largely in line with expectations, except for the core price index report, which reflected an increase of 0.3% versus the 0.2% expected.

The report provided little clarity to the Fed’s path forward with market players still debating potential rate hikes in November and December.

There was $141 million of convertibles trading on the tape about one hour into the session and $605 million on the tape about one hour before the market close with new paper from Amphastar dominating trading.

The new paper was putting in a strong performance despite a mixed day for the broader market.

Corporate Office Properties Trust’s 5.25% exchangeable notes due 2028 (Baa3/BBB-) continued to move lower alongside stock although the notes held onto the strong dollar-neutral gains made since pricing.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 were pushed into the spotlight after the company slashed its forward guidance.

While the notes were lower outright alongside stock, they expanded on the move down.

Amphastar expands

Amphastar priced $300 million of long five-year convertible senior notes after the market close on Tuesday at par with a coupon of 2% and an initial conversion premium of 35%.

Pricing came at the cheap end of talk for a coupon of 1.5% to 2% and at the rich end of talk for an initial conversion premium of 30% to 35%.

The convertible notes were putting in a strong aftermarket performance.

They were changing hands in the 101.75 to 102 context with stock up about 1% early in the session. By the late afternoon, the notes were seen at 101.375 versus a stock price of $46.83.

The notes expanded about 1.25 points on a dollar-neutral, or hedged, basis, a source said.

There was $133 million in reported volume.

Amphastar’s stock traded to a high of $48.40 and a low of $46.16 before closing at $46.30, off 0.73%.

Corporate Office lower

Corporate Office Properties’ 5.25% exchangeable notes due 2028 continued to move lower alongside stock in heavy volume on Wednesday.

However, the notes held onto the strong dollar-neutral gains made since hitting the secondary space.

The 5.25% notes were down about 0.375 point with stock off about 1.5%. They were changing hands at 102.625 versus a stock price of $24.75 in the late afternoon, according to a market source.

There was $21 million in reported volume.

Corporate Office’s stock traded to a low of $24.51 and a high of $25.14 before closing at $24.55, down 1.96%.

While the notes have come in outright over the past few sessions, they have been largely unchanged dollar-neutral with the notes expanded about 1.25 points since pricing.

American Airlines expands

American Airlines’ 6.5% convertible notes due 2025 were in focus on Wednesday after the company slashed its forward guidance.

While the notes were lower outright as stock sank, the notes expanded on the move down, a source said.

The 6.5% notes were off 2.5 points outright with stock down almost 6%.

They were changing hands at 108.125 versus a stock price of $13.23 in the late afternoon.

There was $18 million in reported volume.

American Airlines’ stock traded to a low of $13.20 and a high of $13.73 before closing at $13.31, a decrease of 5.67%.

Stock sank after the company cut its forward guidance, partly due to increased fuel costs and partly due to a new labor contract with pilots.

The airline said it now expects earnings per share of 20 cents to 30 cents versus previous guidance of earnings per share of 85 cents to 95 cents.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

Amphastar Pharmaceuticals Inc. Nasdaq: AMPH

Corporate Office Properties Trust NYSE: OFC

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