Convertibles of Shift4 gain; American Airlines trades higher; Southwest Airlines active

By Abigail W. Adams

Portland, Me., Dec. 4 – The convertibles secondary space continued to see heavy volume on Friday with $172 million on the tape about one hour into the session and about $800 million on the tape one hour before the close.

“People are moving money around,” a source said.

Shift4 Payments Inc.’s 0% convertible notes due 2025 remained active with the notes continuing to gain on an outright and dollar-neutral basis their second day in the secondary space.

Meanwhile, the convertible notes of airlines were in focus on optimism surrounding a rapid deployment of a Covid-19 vaccine.

American Airlines Group Inc.’s once struggling 6.5% convertible notes due 2025 hit a new outright high on Friday.

Southwest Airlines Co.’s 1.25% convertibles due 2025 were also major volume movers although the notes were largely unchanged on the day.

Fortive Corp.’s 0.875% convertible notes due 2022 were also among the top traded issues of Friday’s session with the notes improving alongside stock.

Shift4 gains continue

Shift4’s 0% convertible notes due 2025 continued to gain on an outright and dollar-neutral basis their second day in the secondary space.

The 0% notes traded up to 108.375 early in the session.

They continued to climb as the session progressed and were on a 109-handle in the late afternoon.

The notes continued to expand dollar-neutral and were up another 0.375 point dollar-neutral, a source said.

Shift4’s stock traded to a high of $63.90 and a low of $60.50 before closing the day at $62.55, an increase of 4.35%.

The notes skyrocketed on their aftermarket debut and closed the previous session at 106.687 bid, 107.1875 offered versus a stock price of $59.97.

They were expanded 3.5 points dollar-neutral.

American Airlines eyed

American Airlines’ 6.5% convertible notes due 2025 hit their highest level on an outright basis on Friday as stock continued to tear.

The 6.5% notes traded as high as 125.75 shortly after the opening bell.

However, they came in alongside stock and were on a 123-handle heading into the market close.

The notes expanded about 0.5-point dollar-neutral, a source said.

American Airlines’ stock traded to a high of $16.93 and a low of $16.12 before closing the day at $16.40, an increase of 1.93%.

Stock also reached the highest level on Friday since the notes priced.

The 6.5% convertible notes were in busted territory as recently as early November when they were trading in the mid-80s.

However, the notes have skyrocketed over the past two weeks on optimism surrounding a rapid deployment of a vaccine for Covid-19.

The notes rose more than 10 points outright during Thursday’s session following the United Kingdom’s approval of a Covid-19 vaccine.

Southwest active

Southwest Airlines’ 1.25% convertibles due 2025 were also major volume movers on Friday although the notes were largely unchanged, a source said.

The 1.25% notes were wrapped around 150 in high-volume activity.

Southwest Airlines’ stock traded to a high of $48.79 and a low of $47.07 before closing the day at $47.59, a decrease of 0.48%.

Fortive improves

Fortive’s 0.875% convertible notes due 2022 were also among the top traded issues of the day with the notes improving alongside stock.

The 0.875% notes traded up to a 102-handle in the late afternoon.

Fortive’s stock traded to a high of $71.70 and a low of $69.78 before closing the day at $71.28, an increase of 3.63%.

The 0.875% notes trade on mostly an outright basis. However, they do have a light delta of 35%, a source said.

The notes carry investment-grade ratings and are popular with European accounts.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

Fortive Corp. NYSE: FTV

Shift4 Payments Inc. NYSE: FOUR

Southwest Airlines Co. NYSE: LUV

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