U.S. Steel slips on swap; Atlassian drops with shares; Scorpio Tankers underperforms

By Rebecca Melvin

New York, Oct. 18 – United States Steel Corp.’s 5% convertibles due 2026 slipped slightly on swap on Friday after trading unchanged to slightly lower on swap into the market close on its debut on Thursday.

On a 77% delta or heavier, the bonds leaked a bit on both Thursday and Friday, according to market sources.

A New York-based source quoted the paper at 101.125 bid, 101.625 offered on swap on Friday versus an underlying share price of $10.78. They slipped from the open on Friday, which was at 101.125 bid, 101.875 offered versus a $10.78 share price.

On Thursday the U.S. Steel bonds closed unchanged to down 0.25 point to 0.375 point, depending on delta.

The price at Wednesday’s close was 99.625 bid, 100.125 offered versus $10.48, the share reference price.

Elsewhere, Atlassian Corp. plc’s 0.625% convertibles due 2022 were trading down in active trade after the San Francisco-based developer of collaborative software reported quarterly earnings after the market close on Thursday.

The Atlassian notes were seen last at 151.671, according to Trace data, with shares down more than $10.00, or 9%, at $111.76. That was down from a level of 161 to 163 in the notes on Thursday.

Many convertible names in trade were lower in step with their underlying shares. U.S. equities fell on Friday as investors worried about the prospects for the global economy. The Dow Jones industrial average fell nearly 1%, or 255.68 points, to 26,770.20 and the S&P 500 stock index lost 11.75 points, or 0.4%, to 2,986.20.

Scorpio Tankers Inc.’s 3% convertibles due 2022 traded down 1.5 points to 117.4 with shares coming under pressure amid the fears that sank the U.S. stock indices. The company reports its quarterly earnings on Oct. 30. Scorpio shares closed down 67 cents, or 1.9%, to $34.87.

U.S. Steel eyed

The new U.S. Steel convertible is the first new deal for October and was a major focus of convertibles players this past week.

The Pittsburgh-based integrated steelmaker priced $300 million of 5% seven-year convertibles, which was beyond the cheap end of talk for the coupon and at the cheap end of 27.5% to 32.5% talk for the initial conversion premium.

The convertibles primary market stalled this month after record issuance for September. With $300 million of paper from U.S. Steel, October 2019 is still well behind the same period of last year, when $1.457 billion in seven deals priced during the same three weeks.

The primary has been quiet this month amid blackout periods for companies ahead of earnings reports and following a record September, market sources say.

Issuance for the year to date is still ahead of last year however, with $48.83 billion in 109 deals priced for 2019 so far, compared to $46.53 billion in 136 deals for the same period of 2018.

Mentioned in this article:

Atlassian Corp. plc Nasdaq: TEAM

Scorpio Tankers Inc. Nasdaq: STNG

United States Steel Corp. NYSE: X

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