Lumentum convertible notes lower; Ventas Realty, CMS Energy active; Carnival rises

By Abigail W. Adams

Portland, Me., June 15 – The convertibles primary market stood poised for a quiet end to the week with only one deal clearing the market.

While not dormant, sources have been surprised by the lack of activity, especially with the current strength in equity markets.

“The time to issue is now,” a source said.

The market has been in wait-and-see mode for much of the year as debates regarding recession and rates and the banking crisis and debt-ceiling debacle played out.

The stock market bubble of 2020/2021 has also been a deterrent to issuance with companies reluctant to issue equity-linked securities after the destruction of their stock price.

However, those stock prices were unrealistic and something that companies “just need to get over,” a source said.

While it is unclear what the timing will be with earnings season blackout approaching, there is a backlog of deals in the pipeline, sources say.

Opportunistic capital raises will be few and far between with bankers firmly focused on refinancings, which will remain the trade of the day.

Meanwhile, it was a quiet day in the secondary space as activity surrounding the latest refinancing deal to clear the primary tempered.

Equity markets wobbled at the open but turned higher to end the day with strong gains as markets continued to digest the Federal Open Market Committee’s decision.

While the Fed held rates as expected, the future trajectory remains uncertain with Fed officials presenting a much more hawkish outlook than anticipated but market’s skeptical that more rate hikes are in store.

The Dow Jones industrial average closed up 429 points, or 1.26%, the S&P 500 index closed up 1.22%, the Nasdaq Composite index closed up 1.15% and the Russell 2000 index closed up 0.81%.

There was $69 million in reported volume about one hour into the session and $422 million on the tape about one hour before the market close.

Lumentum Holdings Inc.’s 1.5% convertible notes due 2029 were lower on an outright and dollar-neutral basis in active trade.

Ventas Realty, LP’s 3.75% exchangeable notes due 2026 (Baa1/BBB+) continued to see heavy volume with the notes trading on a 101-handle after dropping as low as par amid the post-Fed volatility the previous session.

Carnival Corp.’s deep-in-the-money convertible notes climbed higher alongside stock with analysts bullish on the cruise line operator.

Lumentum lower

While activity paled in comparison to the previous session, Lumentum’s 1.5% convertible notes due 2029 remained active with the notes lower on an outright and dollar-neutral basis.

The 1.5% notes were changing hands at 102.25 versus a stock price of $55.50 early in the session.

They were trading at 102.75 versus a stock price of $55.99 in the late afternoon.

They crunched a little on the move down, a source said.

There was $24 million in reported volume.

Lumentum’s stock wavered between gains and losses before closing in the red.

Stock traded to a low of $54.76 and a high of $57.38 before closing at $56.40, down 0.053%.

The 1.5% notes made strong outright gains on their aftermarket debut on Wednesday; however, they fell flat dollar-neutral.

Ventas active

Ventas’ 3.75% exchangeable notes due 2026 continued to see heavy volume on Thursday with the notes stabilizing after a round of post-Fed volatility, particularly for investment-grade issues.

The 3.75% notes were changing hands in the 101 to 101.5 context throughout the session.

They were trading at 101.125 versus a stock price of $45.91 in the late afternoon, according to a market source.

With $34.5 million in reported volume, the notes were the most actively traded in the secondary space.

Ventas’ stock traded to a low of $45.59 and a high of $46.32 before closing at $46.14, off 0.39%.

Ventas’ 3.75% notes dropped down to par in the heavy selling that initially followed the Fed announcement on Wednesday.

However, they were lifted into the close.

Carnival bulls

Carnival’s deep-in-the-money convertible notes climbed in active trade as stock continued its bull run.

The 5.75% convertible notes due Oct. 1, 2024 added 3.5 points with stock up more than 3%.

The notes were seen at 173.875 versus a stock price of $16.03 in the late afternoon.

There was $9.5 million in reported volume.

The 5.75% convertible notes due 2027 gained 4 points.

They were changing hands at 149 in the late afternoon.

Reported trading volume in the issue reached $6 million.

Carnival’s stock traded to a low of $15.41 and a high of $16.16 before closing at $16.12, an increase of 3.33%.

The stock has gained about 25% since last Friday and more than 55% over the past month with analysts bullish on the stock.

BofA analysts upgraded Carnival to “buy” from “neutral” and lifted the price target to $20 from $11 on Monday and JPMorgan analysts upgraded the company to “overweight” from “neutral” and lifted the price target to $16 from $11.

Mentioned in this article:

Carnival Corp. NYSE: CCL

Lumentum Holdings Inc. Nasdaq: LITE

Ventas Inc. NYSE: VTR

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