Convertibles lift with stocks; Colony Capital to price; Southwest, Royal Caribbean jump

By Rebecca Melvin

New York, July 15 – Many convertible issues traded higher on an outright basis in tandem with U.S. stocks on Wednesday after news of a promising coronavirus vaccine study.

The new Moderna study showed 45 patients in its early-stage human trial produced a desired immune response.

Trading volumes started out thin and the primary market was quiet. But volume picked up midsession and after the market close another smaller deal launched.

Colony Capital Inc. launched an offering of $200 million five-year exchangeable senior notes with a $30 million greenshoe.

Vaccine news response

Convertibles issues in the airline space got a boost from the vaccine news. American Airlines Group Inc.’s 6.5% convertible notes due 2025, which had been dragging lower this week, snapped back. The bond was up 6.75 points early Wednesday to 90, according to Trace data.

Southwest Airlines Co.’s 1.25% convertibles due 2025 were up three points to 122.6 by late morning and later moved a couple of points higher to 124. Shares of the Dallas-based airline jumped $2.50, or 7.5%, to $35.75.

Shares of cruise lines also jumped higher on Wednesday. Royal Caribbean Cruises Ltd.’s 4.25% convertibles due 2023 surged 10 points to 105.375

Shares of Royal Caribbean surged $10.18, or 21%, to $58.36.

The Covid-19 pandemic has hit the airline and cruise industries hard. Royal Caribbean and the other lines have had little revenue coming in for months, according to reports. However, the promising vaccine trial news from Moderna late Tuesday raised hopes that the drop in revenue may be short-lived and sailing operations may be able to resume sooner than expected.

The New England Journal of Medicine published an interim analysis of Moderna’s phase 1 trial of its experimental vaccine.

Other secondary

Elsewhere, the 0.25% convertibles of Pioneer Natural Resources Co. were trading actively atop the Trace most-actives list. The paper due 2025 was up 2.6 points to 119.358 versus the underlying shares, which had been up by more than 1%, but were most recently up 45 cents, or 0.5%, at $96.15. The oil and natural gas company is based in Irving, Texas.

Prospect News’ did not hear the new Atlantica Sustainable Infrastructure Jersey Ltd. exchangeable, which priced late Tuesday, in trade. The company priced $100 million of the five-year green exchangeable senior notes with a 4% coupon and a 20% initial exchange premium late Tuesday.

Trip.com Group Ltd.’s notes that are exchangeable into shares of Huazhu Group Ltd. moved up again and were seen to have traded with a 107 handle early Wednesday.

The new Trip.com/Huazhu exchangeable priced late Monday with a 1.5% coupon and 20% premium. They were seen to have traded at 102.5 on Tuesday. The Huazhu shares gained 96 cents, or 2.8% in the early going on Wednesday to $35.38. On Tuesday the stock was up 79 cents, or 2.5% on the day.

There were some names that were lower however. DocuSign Inc.’s 0.5% notes due 2023 traded at 268.6, which was down 4.7 points, versus shares, which were down $4.20, or 2.3%, to $192.00.

Colony to price new deal

The Colony exchangeable, which will price subject to market conditions, has a $30 million greenshoe.

The Rule 144A notes will be senior unsecured obligations and will be exchangeable at the option of holders at any time into shares of Colony Capital class A common stock.

The proceeds of the deal will be used to redeem the company’s 3.875% convertible senior notes due 2021 prior to maturity or to repay the 2021 notes at maturity with any remaining proceeds for general corporate purposes.

The real estate investment trust is based in Los Angeles.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

Atlantica Sustainable Infrastructure plc Nasdaq: AY

Colony Capital Inc. NYSE: CLNY

DocuSign Inc. Nasdaq: DOCU

Huazhu Group Ltd. ADS: Nasdaq: HTHT

Pioneer Natural Resources Inc. NYSE: PXD

Royal Caribbean Cruises Ltd. NYSE: RCL

Southwest Airlines Co. NYSE: LUV

Trip.com Group Ltd. Nasdaq: TCOM

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