Infinera eyed; Arbor wrapped around issue; SoFi rises; Match down outright, up on hedge

By Abigail W. Adams

Portland, Me., Aug. 3 – New convertible paper was in focus on Wednesday with one $275 million offering set to price after the market close and $1.25 billion of new paper entering the market.

While the primary market has been on a roll with three deals in as many days, the offerings have all come as refinancing and will do little to increase the net size of the convertibles market, sources said.

However, investor demand for new paper has been strong, and with markets stabilizing sources expect to see a continued uptick of issuance.

Infinera Corp. plans to price $275 million of six-year convertible notes after the market close on Wednesday.

The deal looked cheap based on underwriters’ assumptions and is expected to do well, sources said.

Meanwhile, new paper from Arbor Realty Trust Inc. made its aftermarket debut with the notes holding at issue price in early trading.

Royal Caribbean Group’s newly priced 6% convertible notes due 2025 continued to surge higher after a strong aftermarket debut on Tuesday.

While new paper was in focus, earnings-related volatility pushed some outstanding issues into the spotlight with convertible issuers’ stocks making outsized movements – both to the upside and downside.

SoFi Technologies Inc.’s 0% convertible notes due 2026 made large gains on an outright and dollar-neutral basis as stock surged after an earnings beat and upbeat guidance.

Match Group Inc.’s convertible notes fell outright but improved dollar-neutral as stock tanked post-earnings.

Infinera eyed

Infinera plans to price $275 million of six-year convertible notes after the market close on Wednesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 750 basis points over Libor and a 40% vol., a source said.

Using those assumptions, the deal looked 3.25 points cheap at the midpoint of talk, assuming a normal borrow.

The deal is the latest refinancing deal in the convertibles market with refinancings accounting for the lion’s share of recent issuance.

Proceeds will be used to repurchase a portion of the company’s 2.125% convertible notes due 2024 in privately negotiated transactions.

There is about $400 million of the 2.125% notes outstanding.

The 2.125% notes have been trading in the 97 to 98 range over the past few sessions, according to Trace data.

Arbor flat

Arbor Realty priced an upsized $250 million of three-year convertible notes after the market close on Tuesday at the cheap end of talk with a coupon of 7.5% an initial conversion premium of 10%.

Price talk was for a coupon of 7% to 7.5% and an initial conversion premium of 10% to 15%, according to a market source.

The greenshoe was also upsized to $37.5 million.

The initial size of the deal was $200 million with a greenshoe of $30 million.

The notes played to solid demand during bookbuilding, a source said.

However, they fell flat in secondary market activity with the notes wrapped around par on an outright basis.

The lack of movement in the notes was no surprise with REIT paper “pretty boring,” a source said.

Arbor’s stock traded to a low of $15.05 and a high of $15.56 before closing the day at $15.45, an increase of 1.71%.

The deal was also a refinancing with proceeds used to repurchase a portion of the company’s 4.75% convertible notes due Nov. 1, 2022 for cash.

The 4.75% notes appeared to be repurchased for 101.15 to 101.40, a source said.

Royal surge continues

Royal Caribbean’s newly priced 6% convertible notes due 2025 added to their gains on Wednesday.

The notes were seen at 107.25 early in the session.

They expanded another 0.25 to 0.375 point on hedge, a source said.

Royal Caribbean’s stock traded to a low of $36.96 and a high of $39.09 before closing the day at $38.84, an increase of 5.95%.

The notes made a strong aftermarket debut on Tuesday, gaining 4.5 points outright and expanding 3 to 3.5 points dollar-neutral.

SoFi’s earnings

SoFi’s 0% convertible notes due 2026 made large gains on an outright and dollar-neutral basis as stock jumped double digits following earnings.

The 0% convertible notes gained 4.5 to 5 points outright with stock up more than 25%.

The notes were on 74-handle early in the session and were changing hands at 75.75 in the late afternoon.

The notes gained 1 to 1.5 points dollar-neutral, sources said.

SoFi’s stock traded to a low of $7.05 and a high of $8.42 before closing the day at $8.23, an increase of 28.39%.

The personal finance company posted record revenue in the second-quarter and issued upbeat guidance.

SoFi reported losses per share of 11 cents versus analyst expectations for losses of 10 cents. Revenue was $356.09 million versus analyst expectations for revenue of $344.47 million.

Match’s earnings

Match’s convertible notes fell outright but improved dollar-neutral as stock sank double digits following disappointing earnings.

The 2% convertible notes due 2030 sank 9 points outright.

They were changing hands on a 104-handle heading into the market close.

However, the notes expanded 0.5 to 1 point dollar-neutral on the move down, sources said.

Match’s stock traded to a low of $59.15 and a high of $64.88 before closing the day at $63.24, a decrease of 17.56%.

The stock was the worst performer in the Nasdaq-100 on Wednesday.

Match’s stock tanked after the online dating company reported a quarterly loss of $31.9 million, issued downbeat guidance, and removed the CEO of its Tinder unit.

Mentioned in this article:

Arbor Realty Trust Inc. NYSE: ABR

Infinera Corp. Nasdaq: INFN

Match Group Inc. Nasdaq: MTCH

Royal Caribbean Group NYSE: RCL

SoFi Technologies Inc. Nasdaq: SOFI

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