Ares Capital convertibles dominate trading; Western Digital up; Avalara, Bill.com active

By Abigail W. Adams

Portland, Me., Jan. 7 – The convertibles primary market was silent the first week of the year as volatility in equities continued to pressure the high-flyers that drove new deal activity in 2021.

The calendar is expected to remain light throughout the month with potential issuers on a regular year-end cycle in blackout, a source said.

While there may be a smattering of activity in the coming weeks if markets stabilize, new deal volume is not expected to pick up until February and March, sources said.

Meanwhile, the secondary space remained weak as volatility continued to rock equities with the 10-year Treasury yield marching higher.

Indexes again wavered between gains and losses but closed the day in the red with high-flyers continuing to take the brunt of losses.

The Dow Jones industrial average closed the day down 5 points, or 0.01%, the S&P 500 index closed down 0.41%, the Nasdaq Composite closed down 0.96%, and the Russell 2000 index closed down 1.2%.

The 10-year Treasury yield continued to hit new heights, breaking as high as 1.801% before closing the day at 1.769%.

There was $87 million in reported convertible bonds trading one hour into the session and $560 million about one hour before the market close with an eclectic mix of names on the tape.

Ares Capital Corp.’s 3.75% convertible notes due Feb. 1, 2022 continued to dominate activity in the secondary space as the notes approach their maturity.

Western Digital Corp.’s 1.5% convertible notes due 2024 also saw heavy volume with the notes continuing to improve.

However, Avalara Inc.’s 0.25% convertible notes due 2026 remained under pressure in active trading.

While Bill.com Holdings Inc.’s 0% convertible notes due 2027 improved in active trading, the notes remained near their lowest outright level since pricing.

Ares Capital dominates

Ares Capital’s 3.75% convertible notes due Feb. 1, 2022 continued to dominate activity in the secondary space as the notes approach their maturity.

The 3.75% convertible notes were changing hands just shy of 110.486 early in the session.

They rose to 110.75 as the session progressed, according to a market source.

There was $34 million in reported volume.

The 3.75% notes entered their averaging period on Thursday, which will last until Jan. 27.

Ares Capital’s stock traded to a low of $20.94 and a high of $21.26 before closing the day at $21.22, an increase of 1.34%.

Western Digital active

Western Digital’s 1.5% convertible notes due 2024 saw high-volume activity on Friday with the notes making gains on an outright basis.

The 1.5% notes gained 0.75 point outright, trading up to 102.125 in the late afternoon, according to a market source.

There was more than $30 million in reported volume.

Western Digital’s stock traded to a high of $66.23 and a low of $64.52 before closing the day at $65.83, an increase of 1.68%.

The 1.5% notes have largely traded for their yield.

However, with stock up more than 11% over the past month as investors flee growth stocks for value stocks, the convertible notes’ optionality has increased.

Western Digital also announced on Friday that it had refinanced its A-1 term loans with proceeds from a new A-2 term loan and extended the maturity of its $2.25 billion revolving credit facility to 2027 from 2023, according to a company news release.

Avalara under pressure

Avalara’s 0.25% convertible notes due 2026 remained under pressure in active trading on Friday.

The notes were off about 1 point outright with stock down 1%.

The notes were changing hands at 87.875 versus an equity price of $108.16 in the late afternoon.

There was about $14 million in reported volume.

Avalara’s stock traded to a low of $107.35 and a high of $113.63 before closing the day at $109.22, a decrease of 1.41%.

Bill.com improves

Bill.com’s 0% convertible notes due 2027 were slightly improved in active trading on Friday although the notes remained near their all-time lows on an outright basis.

The notes traded at 94.25 versus an equity price of $204.99 in the late afternoon.

There was $11 million in reported trading volume.

Bill.com’s stock traded to a high of $214.63 and a low of $197.33 before closing the day at $201.93, a decrease of 0.48%.

The 0% convertible notes traded as low as 93 during Thursday’s session, the lowest outright level for the notes since they priced at par in September 2021.

Mentioned in this article:

Ares Capital Corp. Nasdaq: ARCC

Avalara Inc. NYSE: AVLR

Bill.com Holdings Inc. NYSE: BILL

Western Digital Corp. Nasdaq: WDC

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