Morning Commentary: Norwegian Cruise hits the aftermarket, flat on debut; Affirm lower

By Abigail W. Adams

Portland, Me., Feb. 11 – It was an active morning in the convertibles secondary space on Friday as more new paper hit the aftermarket.

NCL Corp. Ltd., a subsidiary of Norwegian Cruise Line Holdings Ltd., priced $435 million of five-year exchangeable notes after the market close on Thursday.

The deal played to heavy demand during bookbuilding but fell flat in the aftermarket as equities struggled to find direction.

The deal capped a high-volume week for the convertibles primary market with $1.735 billion pricing over two deals, despite continued volatility in equities.

While there are deals on deck, primary market activity is expected to remain muted given the carnage in the high-growth tech stocks that drove issuance over the past year.

Equity indexes were wavering between gains and losses as investors digested the latest CPI report and its implications for the Federal Reserve’s rate hike schedule.

The Dow Jones industrial average was up 140 points, or 0.40%, the S&P 500 index was up 0.11%, the Nasdaq Composite was down 0.11% and the Russell 2000 index was up 0.94%, shortly before 11 a.m. ET.

Losses continued to mount for Affirm Holdings Inc.’s 0% convertible notes due 2026 following the head-spinning volatility of the previous session.

Norwegian Cruise flat

NCL priced $435 million of five-year exchangeable notes after the market close on Thursday at par at the rich end of talk with a coupon of 2.5% and an initial exchange premium of 52.5%.

Price talk was for a coupon of 2.5% to 3% and an initial exchange premium of 47.5% to 52.5%, according to a market source.

The deal played to heavy demand during bookbuilding. However, the notes were largely flat in secondary market activity.

The new 2.5% notes were changing hands at 100.125 versus a stock price of $22.66 early in the session.

“Nothing exciting there,” a source said.

There was $40 million in reported volume about one hour into the session.

Norwegian Cruise Line’s stock wavered between gains and losses before shooting higher early in the session.

Stock was changing hands at $22.86, an increase of 1.06%, shortly before 11 a.m. ET.

Affirm losses mount

Affirm’s 0% convertible notes due 2026 remained in focus early Friday with losses for the notes mounting.

The 0% convertible notes fell 2.625 points outright with stock down another 11%.

The notes were changing hands just shy of 75 versus a stock price of $52.01.

Affirm’s stock was down to $51.90, a decrease of 11.55%, shortly before 11 a.m. ET.

Affirm’s stock and convertible notes saw head-spinning volatility during Thursday session.

While stock was up more than 10% early in Thursday’s session in anticipation of positive earnings, it plummeted following the accidental early release of earnings and closed the day down more than 20%.

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