Convertibles secondary quiet; Southern Co., Alliant, PPL catch a bid; Coinbase active

By Abigail W. Adams

Portland, Me., March 24 – It was a quiet end to a volatile week in the convertibles secondary space with market players on the sidelines amid continued volatility in financial markets.

Equities slumped at the open as Treasuries continued their rally amid ongoing concern for the banking sector with Deutsche Bank in the headlines as its credit default swaps spiked.

However, Treasuries came off their highs, Deutsche Bank’s stock recovered and equity indexes fought off losses to close in positive territory.

The Dow Jones industrial average closed Friday up 132 points, or 0.41%, the S&P 500 index closed up 0.56%, the Nasdaq Composite index closed up 0.31% and the Russell 2000 index closed up 0.58%.

There was $46 million in reported volume about one hour into the session and $433 million on the tape about one hour before the market close.

The recent investment-grade issuance remained sought after with the notes looking more attractive as credit spreads widen, sources said.

Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB), Alliant Energy Corp.’s 3.875% convertible notes due 2026 (BBB+) and PPL Capital Funding Inc.’s 2.875% convertible notes due 2028 (Baa1/BBB+) continued to improve in heavy volume with buyers lifting the notes.

Silicon Laboratories Inc.’s 0.625% convertible notes due 2025 remained active after the company called the notes with a redemption date of June 30.

Coinbase Global Inc.’s 0.5% convertible notes due 2026 remained under pressure in active trade on news the crypto exchange may be face SEC enforcement action.

IG bid up

The recent investment-grade issuance remained well bid for in the secondary space with the notes looking more attractive amid widening credit spreads.

“Treasuries have been so strong, the recent IG paper is catching a bid,” a source said.

Southern Co.’s 3.875% convertible notes due 2025 hit their highest outright level since pricing.

The 3.875% notes were wrapped around 101 versus a stock price of $67.94 in the late afternoon, according to a market source.

There was $21 million in reported volume.

Southern Co.’s stock traded to a low of $66.42 and a high of $68.60 before closing at $68.59, an increase of 3.39%.

Alliant’s 3.875% convertible notes due 2026 climbed 0.75 point outright.

They were changing hands at 101.375 versus a stock price of $51.16 in the late afternoon.

There was $20 million in reported volume.

Alliant’s stock traded to a low of $49.94 and a high of $51.85 before closing at $51.83, up 3.58%.

PPL’s 2.875% convertible notes due 2028 climbed 0.75 outright to return to a 98-handle.

The notes were trading at 98.5 versus a stock price of $26.60 in the late afternoon, according to a market source.

There was $13 million in reported volume.

PPL’s stock traded to a low of $25.88 and a high of $26.79 before closing at $26.78, an increase of 3.4%.

Southern Co., PPL and Alliant priced investment-grade convertible notes in late February.

The convertible notes from all three issuers were off to a sloppy start in the aftermarket with oversaturation dragging all three issues below par.

However, buyers have been lifting the notes over the past two weeks amid widening credit spreads.

Silicon Labs active

Silicon Laboratories’ 0.625% convertible notes due 2025 remained active after the company called the notes with a redemption date of June 30.

The 0.625% notes were seen at 146.5 versus a stock price of $169.28 early in the session.

They were seen at 144.5 versus a stock price of $168.84 in the late afternoon.

There was $10 million in reported volume.

Silicon Laboratories’ stock traded to a low of $167.42 and a high of $171.81 before closing at $169.17, a decrease of 2.21%.

The notes have been active as the company prepares to take them out with convertible arbitrage players setting the notes up for their averaging period, which begins on April 20, a source said.

Coinbase under pressure

Coinbase’s 0.5% convertible notes due 2026 remained under pressure in heavy volume on Friday after the SEC threatened to take enforcement action against the crypto-exchange.

The 0.5% notes traded down to a 60-handle in early trade but improved as the session progressed.

They were changing hands at 62.5 versus a stock price of $66.73 in the late afternoon, according to a market source.

There was $15 million in reported volume.

Coinbase’s stock traded to a low of $63.53 and a high of $68.73 before closing at $67.83, up 2.31%.

The 0.5% notes sank 7 points outright and contracted 2 to 3 points dollar-neutral on Thursday on news the crypto-exchange had been served a Wells notice informing the company about possible enforcement action.

The notice was the latest development in a longstanding dispute about some of the products offered by Coinbase, which the SEC claims are securities that need to be registered.

Mentioned in this article:

Alliant Energy Corp. Nasdaq: LNT

Coinbase Global Inc. Nasdaq: COIN

PPL Capital Funding Inc. NYSE: PPL

Silicon Laboratories Inc. Nasdaq: SLAB

Southern Co. NYSE: SO

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