Freshpet convertibles on deck; American Airlines paper lower; Sea notes recoup losses

By Abigail W. Adams

Portland, Me., March 14 – The convertibles primary market returned to action on Tuesday as equity and credit markets rebounded from the shockwaves of SVB Financial Group’s near overnight implosion.

Freshpet Inc. plans to price $350 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 2.5% to 3% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

BofA Securities Inc. and Goldman Sachs & Co. LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $52.5 million.

The offering looked attractive and was expected to play to strong demand as markets stabilized.

There was growing confidence in the banking sector after the extraordinary measures taken by banking regulators to backstop all deposits at Silicon Valley Bank and Signature Bank and prevent future bank runs.

“They calmed down the contagion,” a source said.

February’s Consumer Price Index report, which was released pre-open and came largely in line with expectations, further helped lift market sentiment with expectations for the Federal Reserve’s rate hike schedule dramatically altered.

The ‘Fed Put’ seemed to be in full effect, sources said.

However, confidence wavered mid-session as regional banks gave back much of their gains from a strong open.

First Republic Bank’s stock, which has become a closely watched barometer for the banking sector, opened Tuesday with a more than 60% gain.

However, after trading to a high of $50.97, First Republic’s stock closed Tuesday at $39.63, an increase of 26.98%.

“If these bank stocks roll over so will the market,” a source said.

Equities roared at the open, gave back much of their gains in intraday trade but were lifted into the close.

The Dow Jones industrial average closed Tuesday up 336 points, or 1.06%, the S&P 500 index closed up 1.68%, the Nasdaq Composite index closed up 2.14%, and the Russell 2000 index closed up 1.53%.

There was $91 million on the tape about one hour into the session and $571 million about one hour before the market close.

Liquidity trades continued to drive volume with sellers raising cash where they were able, sources said.

American Airlines Group Inc.’s 6.5% convertible notes due 2025, Plug Power Inc.’s deep-in-the-money 3.75% convertible notes due 2025 and Booking Holdings Inc.’s 0.75% convertible notes due 2025 (A3/A-) were among the liquidity trades that dominated the tape, a source said.

MicroStrategy Inc.’s 0.75% convertible notes due 2025 made large gains on Tuesday as Bitcoin continued its upward momentum with the cryptocurrency a surprise benefactor of investor’s shaken confidence in the banking sector.

Sea Ltd.’s 0.25% convertible notes due 2026 were active early in the session although activity in the name tempered as the session progressed.

The notes recouped their losses from the previous session.

Liquidity trades

While the market tone improved on Tuesday, liquidity trades remained in focus with market players continuing to raise cash amid a new level of uncertainty in the markets.

“People are selling on an up day,” a source said.

American Airlines’ 6.5% convertible notes due 2025 were among the names that saw large prints on Tuesday.

They were down 1.5 points outright with stock off about 1%.

The notes were changing hands just shy of 115 versus a stock price of $14.63 in the late afternoon.

They contracted about 0.5 point dollar-neutral, a source said.

There was $17 million in reported volume and $60 million in estimated volume.

American Airlines’ stock traded to a high of $15.32 and a low of $14.48 before closing at $14.66, down 1.28%.

Plug Power’s deep-in-the-money 3.75% convertible notes due 2025 were also active with a large seller in the market.

The 3.75% convertible notes due 2025 were changing hands at 249.875 versus a stock price of $12.63 in the late afternoon.

There was $6 million in reported volume and $30 million in estimated volume.

Plug Power’s stock traded to a high of $13 and a low of $11.86 before closing at $12.16, a decrease of 1.94%.

Booking’s 0.75% convertible notes due 2025 also saw several large prints on Tuesday.

The 0.75% notes were seen just shy of 142.25 versus a stock price of $2,505.15 early in the session.

They traded at 142 in the late afternoon.

There was $15 million in reported volume.

Booking’s stock traded to a high of $2,513.36 and a low of $2,460 before closing at $2,475.75, up 1.51%.

MicroStrategy gains

MicroStrategy’s 0.75% convertible notes due 2025 saw large gains on Tuesday with Bitcoin a surprise benefactor of shaken confidence in the U.S. banking sector.

The notes rose 3 points outright.

They were changing hands at 75.5 versus a stock price of $228.57 in the late afternoon.

The notes expanded about 0.5 point dollar-neutral.

There was $10 million in reported volume.

MicroStrategy’s stock traded to a high of $244.41 and a low of $222.09 before closing at $229.47, an increase of 2.83%.

While stock made nominal gains on Tuesday, it shot up 16% on Monday as Bitcoin shot up to its $25,000 resistance level.

Bitcoin has jumped more than 20% since Sunday as investors turn toward the cryptocurrency as a safe haven from the turmoil in the banking sector.

Sea recovered

Sea’s 0.25% convertible notes due 2026 were active early in the session with the notes recouping their losses from the previous session.

The notes opened the day on a 76-handle but climbed to trade at 77.5 versus a stock price of $78.16 early in the session.

While activity in the name tempered as the session progressed, the notes remained wrapped around 77.5.

The yield on the notes was just shy of 7.75%.

There was $8 million in reported volume.

Sea’s American Depositary Shares traded to a low of $75.82 and a high of $78.51 before closing at $76.64 for a 2.47% gain.

The notes fell 1.5 points to trade down to 76 early on Monday.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

Booking Holdings Inc. Nasdaq: BKNG

MicroStrategy Inc. Nasdaq: MSTR

Plug Power Inc. Nasdaq: PLUG

Sea Ltd. NYSE: SE

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