High-grade convertible notes in focus on sleepy day in secondary; Rexford comes in

By Abigail W. Adams

Portland, Me., April 1 – The convertible bond primary market was quiet on Monday with no deals launching.

While sources do expect a smattering of deals, the pace of issuance is expected to be slow in the weeks ahead with issuers in earnings season blackout.

Meanwhile, the secondary space was similarly quiet on the first day of the new quarter with trading volume light and few notable movements in the space.

Equity indexes were mixed to launch the quarter with the Dow Jones industrial average closing Monday down 241 points, or 0.6%, the S&P 500 index closing down 0.2%, the Nasdaq Composite index closing up 0.11% and the Russell 2000 index closing down 1.02%.

There was $68 million in reported volume about one hour into the session and $337 million in the late afternoon with nine of the top-traded names on the tape investment-grade issues.

“That says it all,” a source said in reference to the activity in the market.

Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB) were among those top-traded names in the space although with little movement in price.

NextEra Energy Capital Holdings Inc.’s 3% exchangeable notes due 2027 (Baa1/BBB+) and Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) were also in focus.

Rexford Industrial Realty, LP’s two tranches of exchangeable notes (Baa2/BBB+/BBB+) also continued to trade with the notes lower alongside stock.

High-grade trades

It was a high-grade day in the convertible secondary space on Monday with nine of the top 10 traded issues investment-grade.

Duke Energy’s 4.125% convertible notes due 2026, NextEra’s 3% exchangeable notes due 2027, and Southern Co.’s 3.875% convertible notes due 2025 were among the top volume movers although with little change in price.

Duke’s 4.125% notes were wrapped around 99 with stock at $96.71 early in the session, a source said.

They were trading at 98.625 versus a stock price of $95.64 in the late afternoon.

There was $21 million in reported volume.

Duke Energy stock traded to a low of $95.38 and a high of $96.59 before closing the day at $96.07, a decrease of 0.63%.

NextEra’s 3% exchangeable notes due 2027 were trading at 106.5 versus a stock price of $62.97 in the late afternoon, a source said.

There was $15 million in reported volume.

NextEra stock traded to a low of $62.76 and a high of $64.04 before closing the day down $63.38, a decrease of 0.83%.

Southern Co.’s 3.875% convertible notes due 2025 were trading at 99.5 versus a stock price of $70.86, a source said.

There was $13 million in reported volume.

Southern Co.’s stock traded to a low of $70.56 and a high of $71.70 before closing the day at $71.10, a decrease of 0.89%.

High-grade names are highly liquid issues, which is why activity is concentrated in them on slow days for the market, a source said.

Rexford comes in

Rexford’s two tranches of recently priced exchangeable notes remained active on Monday with the notes moving lower alongside stock.

The 4.375% exchangeable notes due 2027 were off about 1 point outright with stock off more than 2%.

They were trading at 100.75 versus a stock price of $48.89 in the late afternoon, according to a market source.

There was $12 million in reported volume.

The 4.125% exchangeable notes due 2029 were down 1.25 points outright.

They were trading just north of 100.875 versus a stock price of $49.03 in the late afternoon.

There was $8 million in reported volume.

Rexford stock traded to a low of $48.76 and a high of $50.22 before closing the day at $48.84, a decrease of 2.9%.

The exchangeable notes have put in a solid performance in the aftermarket since pricing at par on March 26.

The greenshoes were exercised in full lifting the size of each tranche to $575 million.

Mentioned in this article:

Duke Energy Corp. NYSE: DUK

NextEra Energy Partners LP NYSE: NEP

Rexford Industrial Realty Inc. NYSE: REXR

Southern Co. NYSE: SO

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