Welltower, PPL convertible notes weaken; TripAdvisor active; Wayfair closes below par

By Abigail W. Adams

Portland, Me., May 22 – The convertibles primary market was quiet on Monday with sources mixed about the prospects for new issuance over the week.

While the investment-grade primary market continued to unleash straight debt at a dizzying pace, the calendar for the convertibles primary market was heard to not be as robust as previously anticipated.

Continued uncertainty in financial markets and the stock prices of small cap companies, which account for the majority of convertible issuance, continue to keep issuers at bay.

While the mega cap companies have rallied substantially in 2023, small cap stocks have not participated. Pitching an equity-linked capital raise to a company with stock at a depressed levels is a tough sell, sources say.

Meanwhile, it was a quiet day in the convertibles secondary space with equity indexes mixed as market players eye debt-ceiling negotiations.

The Dow Jones industrial average closed Monday down 140 points, or 0.42%, the S&P 500 index closed up 0.02%, the Nasdaq Composite index closed up 0.50% and the Russell 2000 index closed up 1.18%.

There was $38 million in reported volume about one hour into the session and $306 million on the tape about one hour before the market close with few names seeing concentrated trading activity.

The investment-grade issues of 2023 that priced with a 2-handle were the top traded names in the space on Monday.

Welltower Inc.’s 2.75% convertible notes due 2028 (Baa1/BBB+) and PPL Corp.’s 2.875% exchangeable notes due 2028 (Baa1/BBB+) were weaker in the heavy volume.

TripAdvisor Inc.’s 0.25% convertible notes due 2026 were active although with little movement in price.

Wayfair Inc.’s recently priced 3.5% convertible notes due 2028 remained volatile with the notes closing the day below par.

Weaker

The investment-grade issues of 2023 that priced with a 2-handle saw the heaviest volume in an otherwise quiet session with both issues weaker as Treasury yields rose.

Welltower’s 2.75% convertible notes due 2028 dropped below par on Monday for the first time since pricing although they fought back to close the day above.

The 2.75% notes traded down to 99.875 early in the session, according to a market source.

However, they regained par as the session progressed and were changing hands at 100.25 in the late afternoon.

There was $13 million in reported volume.

Welltower’s stock traded to a low of $76.31 and a high of $77.42 before closing at $76.50, down 0.052%.

Welltower’s 2.75% convertible notes have largely traded on a 101-handle since the $1.04 billion issue priced at par on May 8.

However, the notes dropped to a par handle last Friday.

PPL’s 2.875% exchangeable notes due 2028 fell 0.625 point outright to trade on a 97-handle.

The notes were trading at 97.5 in the late afternoon.

There was $13 million in reported volume.

PPL’s stock traded to a low of $26.86 and a high of $27.28 before closing at $27.03, off 0.11%.

Monday marked the lowest outright level for the notes since mid to late March.

TripAdvisor active

TripAdvisor’s 0.25% convertible notes due 2026 saw a burst of activity on Monday.

The 0.25% notes saw little movement in dollar price with the notes remaining on an 83-handle.

There were several prints in the name at 83.7, a source said.

The yield was 6.6%.

There was $8 million in reported volume

While a high-premium name, TripAdvisor’s stock traded to a low of $15.86 and a high of $16.21 before closing at $16.10, an increase of 1.39%.

Wayfair volatile

Wayfair’s 3.5% convertible notes due 2028 remained volatile on Monday with the notes again falling below par after trading as high as 104 the previous session.

The 3.5% notes sank 4.5 points outright with stock off about 1.5%.

They were seen at 98.25 in the late afternoon, according to a market source.

There was $5 million in reported volume.

The notes have been volatile since the $690 million issue priced at par on May 9 with the notes whipsawing between above and below par.

The 3.5% notes hit their highest outright level since pricing on Friday with the notes closing the week at 104.

Wayfair’s 0.625% convertible notes due 2025 were also active although with little movement in price.

The notes were changing hands at 80.5 in the late afternoon with the yield 10.125%.

There was $6 million in reported volume.

Wayfair’s stock traded to a low of $33.85 and a high of $35.34 before closing at $34.40, a decrease of 2.55%.

Mentioned in this article:

PPL Corp. NYSE: PPL

TripAdvisor Inc. Nasdaq: TRIP

Wayfair Inc. NYSE: W

Welltower Inc. NYSE: WELL

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