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Morning Commentary: Convertibles trading sideways; upsized Liberty Media edges par
By Rebecca Melvin
New York, Nov. 22 – U.S. convertibles on Friday were trading little changed, moving in step with U.S. stocks and bonds, which were also flat amid a lack of compelling news headlines, a New York-based market source said.
“It’s quiet,” the source said. “There is stuff trading, but its trading sideways. The market is basically unchanged.”
There was a new, chunky deal of Liberty Media Corp. debentures, exchangeable into shares of Sirius XM Holdings Inc., in the market. The new paper was seen changing hands at 100.5, which one trader thought looked to be in line, or flat on a swap basis, although the trader wasn’t following the issue.
Liberty priced an upsized $525 million of the 2.75% debentures due 2049, representing the second such deal in the market that was structured identically. Liberty also priced a $400 million of debentures exchangeable into Sirius XM in 2018. That paper bears a 2.125% coupon.
The newer deal received a bit of push back regarding its deliverable, a market source said. Upon an exchange, Liberty may deliver Sirius common stock or the value in cash or shares of Liberty’s series C Liberty SiriusXM common stock, or any combination of shares of Sirius common shares, cash and/or shares of Liberty’s series C Liberty SiriusXM stock.
This means that if Liberty chooses to deliver its series C stock, which has less value than the Sirius stock, it will deliver more of the series C stock so as to equal the value of the Sirius stock. It’s the same structure as the earlier Liberty/Sirius exchangeable, which “was a very good deal,” the market source said.
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