Convertibles quiet amid stock sell-off; Fortive tops par; Southwest Airlines active

By Abigail W. Adams

Portland, Me., July 24 – The convertibles secondary space was quiet on Friday as equities traded off following increased tensions between the United States and China.

There was about $68 million in reported volume a little over one hour into Friday’s session and $450 million at the market close, sources said.

Activity surrounding the new deals to price over the course of the week tapered off.

However, Limelight Networks Inc.’s newly priced 3.5% convertible notes due 2025 were sought after with several accounts interested in buying the notes.

While primary market activity was light over the past week, it is expected to pick up in the coming week as companies exit their earnings season blackout.

Several companies have pre-announced their intention to issue equity-linked securities, sources said.

NRG Energy Inc. was among them with plans to issue $750 million of equity linked securities, in addition to $2.361 billion in secured and unsecured notes, to help fund its acquisition of Direct Energy, Prospect News reported.

With activity surrounding the new deals slowing down, several outstanding issues returned to the spotlight.

Fortive Corp.’s 0.875% convertible notes due 2022 were the top volume movers of Friday’s session with the notes topping par for the first time since the March meltdown.

Southwest Airlines Co.’s 1.25% convertible notes due 2025 were also active with the notes trading down alongside stock.

Limelight in demand

Limelight Networks’ newly priced 3.5% convertible notes due 2025 continued to improve on Friday with several buyers interested in the notes.

However, while there was buying interest, the notes were slow to trade with holders unwilling to let them go.

While volume was light, the notes were seen up 4 points outright to change hands at 105, a market source said.

After getting crushed on Thursday, Limelight stock pared some of its losses on Friday.

Stock traded to a high of $6.37 and a low of $6.00 before closing the day at $6.22, an increase of 1.8%.

The 3.5% notes skyrocketed on their aftermarket debut.

While they closed the day at 101 on an outright basis, they traded up to 103.5 in intraday activity, even with stock down more than 6%.

The notes expanded 4 points dollar-neutral on their Thursday debut.

Limelight priced a $110 million offering of the 3.5% notes in an overnight deal after the market close on Wednesday.

Fortive tops par

Fortive’s 0.875% convertible notes due 2022 were the top traded issue of Friday’s session with the notes topping par for the first time since the March sell-off.

The 0.875% notes traded as high as 100.4 in intraday activity, a market source said.

They saw more than $25 million in reported volume heading into the close.

The notes were trading up on an outright basis even as stock traded off during Friday’s session.

Fortive stock traded to a high of $72.63 and a low of $70.86 before closing the day at $71.00, a decrease of 2.11%.

Volume in the name has been light throughout July with the notes largely moving in the 98 to 99 range, according to Trace data.

It is unclear what prompted the activity in the notes, a source said. Fortive is slated to report second-quarter earnings on July 28.

Southwest active

Southwest Airlines’ 1.25% convertible notes due 2025 were active on Friday with the notes trading down alongside stock.

The 1.25% notes were changing hands at 119.125 with stock off more than 2% early in the session.

The notes continued to trend lower as the session progressed and were changing hands at 118.625 heading into the market close, a source said.

There was about $13 million in reported volume heading into the market close.

Southwest stock traded to a high of $32.45 and a low of $31.57 before closing the day at $31.66, a decrease of 3.48%.

Mentioned in this article:

Fortive Corp. NYSE: FTV

Limelight Networks Inc. Nasdaq: LLNW

NRG Energy Inc. NYSE: NRG

Southwest Airlines Co. NYSE: LUV

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