II-VI mandatory convertible preferreds up in early trading; American Airlines improves

By Abigail W. Adams

Portland, Me., July 2 – The final day of the truncated holiday week opened with new convertible paper entering the space.

II-VI Inc. priced $400 million, or 2 million shares, of three-year par of $200 series A mandatory convertible preferred stock after the market close on Wednesday.

The new paper made large gains soon after the opening bell.

While activity outside of the new paper remained subdued, the convertibles secondary space closed the truncated holiday week on firm footing.

While equities traded off their highs as the session progressed, they still closed the day with gains as risk assets continued their rally on a better-than-expected June jobs report.

The tech sector was particularly firm as the tech-heavy Nasdaq topped yesterday’s record-setting close and ended Thursday at 10,207.63, an increase of 53 points or 0.52%.

Okta Inc.’s 0.375% convertible notes due 2026 continued their upward momentum on Thursday, adding to their dollar-neutral gains.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 continued to see heavy volume.

While the notes remained volatile on an outright basis, they were posting gains dollar-neutral.

II-VI gains

II-VI priced $400 million, or 2 million shares, of three-year par of $200 series A mandatory convertible preferred stock after the market close on Wednesday at par at the midpoint of talk with a dividend of 6% and a threshold appreciation premium of 20%.

Price talk was for a dividend of 5.75% to 6.25% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

Concurrently, the company priced an upsized secondary offering of $400 million, or 9,302,235 shares, of common stock at $43.00 per share.

The offering’s greenshoe was also upsized to $60 million.

The initial size of the secondary offering was $350 million with a greenshoe of $52.5 million.

The new paper skyrocketed on its secondary market debut.

The preferred stock traded as high as 208 early in the session, a market source said.

Other sources queried were not active in the name.

II-VI stock traded as high as $45.20 shortly after the opening bell.

However, stock came in as the session progressed and traded to a low of $43.92 before closing the day at $44.10, an increase of 1.37%.

Okta rallies

Okta’s recently priced 0.375% convertible notes due 2026 continued their rally on Thursday with the tech sector, in general, on the rise.

The 0.375% convertible notes continued to change hands around 111 and stood poised to close the day at 111.75, according to a market source.

The 0.375% notes were up 0.5 to 0.625 points dollar-neutral.

Okta stock traded to a high of $211.88 and a low of $204.80 before closing the day at $207.76, a decrease of 1.5%.

The 0.375% notes have gained on an outright and dollar-neutral basis over the past week as stock broke out.

Stock set a new 52-week high of $212.015 in intraday trading on Wednesday.

Okta stock was $180.07 when the San Francisco-based enterprise identity provider priced the $1 billion issue of the 0.375% notes at par on June 10.

The tech sector in general has ripped into the third quarter.

American Airlines rises

While American Airlines’ 6.5% convertible notes due 2025 remained volatile on an outright basis, they improved dollar-neutral in high-volume activity.

The 6.5% notes traded up to 95.25 with stock up early in the session, a market source said.

However, they traded down to 93.125 as stock again gave up its gains to close the day with losses.

While the notes continued to struggle on an outright basis, they were up 0.375 to 0.5 point dollar-neutral.

American Airlines stock traded to a high of $13.42 and a low of $12.42 before closing the day at $12.50, a decrease of 2.42%.

Stock was up early Thursday as news reports surfaced that the airline was one of five that had finalized the terms of its loan from the Treasury Department.

News also broke on Thursday that American Airlines has 20,000 more employees than it needs for its fall schedule, CNBC reported.

However, the terms of the CARES act loan that it is receiving from the Treasury Department prohibits staff layoffs.

Mentioned in this article:

II-VI Inc. Nasdaq: IIVI

American Airlines Group Inc. Nasdaq: AAL

Okta Inc. Nasdaq: OKTA

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