Fluor on tap; ON Semiconductor convertibles contract; ‘No-Nos’ under pressure; Insmed up

By Abigail W. Adams

Portland, Me., May 12 – The convertibles primary market continued to churn out deals with one convertible preferred offering launching after the market close.

Fluor Corp. plans to price $450 million, or 450,000 shares, of par-of-$1,000 perpetual convertible preferred stock after the market close on Thursday with price talk for a dividend of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

BofA Securities Inc. and BNP Paribas Securities Corp. are bookrunners for the Rule 144A offering, which carries a greenshoe of $67.5 million, or 67,500 shares.

Meanwhile, it was another red day in the convertibles secondary space as the latest Consumer Price Index report, which reflected the largest jump in consumer prices since 2009, rattled investors and unleashed a torrent of selling in equities.

The Dow Jones industrial average closed the day down 681 points, or 1.99%, the S&P 500 index closed the day down 2.14% and the Nasdaq Composite finished down 2.67%.

“More tears in the coffee,” a source said.

The sell-off in equities came as ON Semiconductor Corp.’s new paper, the latest deal to price at par with a 0% coupon, made its aftermarket debut.

The new paper dropped below par and was contracted dollar-neutral, sources said.

Several other 0% coupon bonds remained under pressure amid the latest sell-off in equities.

However, Insmed Inc.’s 0.75% convertible notes due 2028 were a bright spot with the notes making gains on an outright and dollar-neutral basis their second day in the secondary space.

While the convertibles secondary space remained under pressure on Wednesday, the market was not in serious distress with paper still bid for and buyers still in the market, a source said.

ON Semiconductor active

ON Semiconductor priced $700 million of six-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 42.5%.

Pricing came in line with talk for a fixed coupon of 0% and at the midpoint of talk for an initial conversion premium of 40% to 45%, according to a market source.

The new paper traded in a range of 99.375 to 100.5 early in the session. However, it traded down to 99.5 about one hour after the opening bell and remained below par for the remainder of the session.

The notes were changing hands at 99.125 in the late afternoon, a source said.

They contracted about 0.25 point dollar-neutral.

ON Semiconductor’s stock traded to a high of $37.70 and a low of $35.34 before closing the day at $35.67, a decrease of 4.04%.

While ON Semiconductor’s new 0% convertible notes were struggling on their aftermarket debut, volume in the name was relatively light.

The majority of allocations of the new paper went to holders of the 1.625% convertible notes, a source said.

Concurrently with the new offering, the company entered into privately negotiated transactions to repurchase or exchange $372.4 million in principal of its 1.625% convertible notes due 2023 for $507 million in cash and 5.4 million shares.

‘No-Nos’ under pressure

Several “No-Nos,” or 0% coupon bonds that priced at par, continued to struggle amid another brutal day for equities.

DraftKings Inc.’s 0% convertible notes due 2028 traded down to 84 as stock continued its downward spiral.

Stock traded to a high of $44.79 and a low of $41.44 before closing the day at $42.11, a decrease of 4.32%.

Airbnb Inc.’s 0% convertible notes due 2026 traded down to 92 as stock continued to drop in the run up to the company’s earnings report.

Airbnb’s stock traded to a high of $144.77 and a low of $138.75 before ending the day at $140.25, a decrease of 1.74%.

Airbnb’s stock has been on a downward spiral over the past two weeks.

The online marketplace for vacation rentals is scheduled to report earnings on Thursday.

Shake Shack Inc.’s 0% convertible notes due 2028 traded down to 84 as stock dropped another 8% on Wednesday.

Shake Shack’s stock traded to a high of $89.18 and a low of $81.33 before closing the day at $82, a decrease of 8.92%.

Shake Shack’s convertible notes and stock have tanked since the restaurant chain reported earnings last week.

Insmed day two

While markets were heavy on Wednesday, Insmed’s new 0.75% convertible notes due 2027 were a bright spot with the notes making gains on an outright and dollar-neutral basis.

The notes traded as high as 107 during Wednesday’s session.

However, they came in to trade around 105 heading into the market close.

The notes gained about 0.5 point dollar-neutral, erasing their dollar-neutral contraction from the previous session, a source said.

Insmed’s stock traded to a high of $27.97 and a low of $26.40 before closing the day at $26.46, a decrease of 1.85%.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

DraftKings Inc. Nasdaq: DKNG

Fluor Corp. NYSE: FLR

Insmed Inc. Nasdaq: INSM

ON Semiconductor Corp. Nasdaq: ON

Shake Shack Inc. NYSE: SHAK

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