Morning Commentary: Spirit Realty convertibles active at higher levels on the back of S&P upgrade

By Rebecca Melvin

New York, April 25 – Spirit Realty Capital Inc.’s two convertibles remained a centerpiece of trade early Monday as market players continued to react to the Standard & Poor’s corporate credit rating upgrade of the Scottsdale, Ariz.-based real estate investment trust on Friday, market sources said.

Spirit Realty’s 2.875% convertibles due 2019 were trading actively at 103, which was steady compared to Friday’s level, which jumped 2.5 points on the news.

Spirit Realty’s 3.75% convertibles due 2020 were at 105, which was up 3.5 points from Thursday.

Spirit shares were down fractionally early Monday at about $11.15.

S&P upgraded the corporate credit rating on Sprit Realty to BBB- from BB+, saying the upgrade primarily reflected the REIT’s recently upsized equity issuance, which resulted in net proceeds of $369 million.

The new equity modestly lowered leverage and is also expected to accelerate the pace of unencumbering the company’s asset base.

Overall the convertibles market was pretty quiet, but the Spirit Realty A and B tranches were trading “on the back of the SPIX upgrade to IG on Friday,” a New York-based trader said.

A second New York-based trader agreed, saying that it was likely that activity in the Spirit tranches remained strong because market players were “still positioning themselves” after a slow Friday.

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