Morning Commentary: Trip.com plans new notes deal; Southwest slips in line with shares

By Rebecca Melvin

New York, July 13 – The convertibles primary market remained alive early Monday with Trip.com Group Ltd.’s proposed offering of up to $500 million of seven-year exchangeable senior notes.

The deal caught the attention of market players in the absence of any other new paper proposed this week, which marks the middle of July.

The Trip.com Regulation S notes were seen “pretty cheap if it’s going to be TCOM credit,” a market source said referring to the company by its ticker symbol. But the source went on to comment that he is not partial to Huazhu Group Ltd., the underlying exchange value for the exchangeable, and therefore his firm is unlikely to make a market in the paper.

Upon exchange, the company will deliver cash, American Depositary Shares of Huazhu Group, each representing one ordinary share of Huazhu, or a combination of cash and Huazhu ADSs, at its election subject to certain conditions.

The new exchangeables were being talked with a 1.25% to 1.75% coupon and with an exchange premium of 20% to 25%.

The proceeds will be used for general corporate purposes, including repayment of existing debt.

Shanghai-based Ctrip.com is a travel services provider.

Southwest Airlines Co.’s 1.25% convertibles due 2025 slipped in tandem with their underlying shares early Monday. The bond traded at 119.9 and then later at 119.1, according to Trace data, as shares of the bonds slipped in the early going by 40 cents, or 1.2% to $32.80.

The shares were giving back some gains notched on Friday.

Southwest priced the $2.3 billion convertible issue at the end of April when the stock reference price was $28.50.

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