Morning Commentary: Luckin Coffee, Air Transport convertibles eyed in early trading

By Abigail W. Adams

Portland, Me., Jan. 16 – The convertible secondary space remained active early in Thursday’s session after a week of heavy trading volume.

However, it was the usual suspects topping the volume charts, a source said.

There was $104 million in reported volume less than one hour into Thursday’s session.

Luckin Coffee Inc.’s 0.75% convertible notes due 2025 continued to dominate activity in the secondary space with the notes grinding higher on an outright basis.

The 0.75% notes topped 110 early in Thursday’s session, according to a market source. “They’re a beast,” the source said.

The notes saw more than $22 million in reported volume less than one hour into the session.

Luckin’s ADS were also on the rise alongside the broader market.

The ADS changed hands as high as $48.39 early in the session but came in and were trading at $46.69, an increase of 3.49%, shortly before 11 a.m. ET.

Air Transport Services Group, Inc.’s 1.125% convertible notes due 2024 saw renewed attention in the secondary space as the aircraft leasing and air cargo transportation service provider prepares a high-yield bond offering.

The 1.125% notes were changing hands at 99.25 with $3 million in reported volume about one hour into the session.

The notes were most likely a yield play with the yield to maturity about 1.3%, sources said.

The notes were active as the company prepares to price a $400 million offering of high-yield notes on Thursday. Initial guidance for the offering was 5.25%.

With interest rates low and credit spreads between investment-grade and high-yield bonds at historic tights, potential issuers may be forgoing convertibles in favor of straight debt, a source said.

However, in Air Transport’s case, it was most likely good for the company’s outstanding convertible that it opted to issue a high-yield bond, another source said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.