Coinbase on deck; Southwest Airlines down outright, up on hedge; MP Materials weakens

By Abigail W. Adams

Portland, Me., March 12 – The convertibles primary market returned to action on Tuesday with one large offering launching post-close.

Coinbase Global Inc. plans to price $1 billion of six-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Citigroup Global Markets Inc. is the bookrunner for the Rule 144A offering, which carries a greenshoe of $150 million.

Meanwhile, the secondary space was relatively unchanged as markets digested the latest Consumer Price Index report, which again came in hotter than expected.

While the report drove up Treasury yields, equity indexes were mixed with the small cap index, which carries the heaviest rate risk, underperforming.

The Dow Jones industrial average closed Tuesday up 236 points, or 0.61%, the S&P 500 index closed up 1.12%, the Nasdaq Composite index closed up 1.54% and the Russell 2000 index closed down 0.02%.

“They’re just glad it wasn’t worse than last month,” a source said of the market’s response to the CPI print.

The convertibles secondary space was relatively active on Tuesday with $166 million in reported volume about one hour into the session and $788 million on the tape in the late afternoon.

High-grade names were again the top volume movers in the space.

NextEra Energy Capital Holdings Inc.’s 3% exchangeable notes due 2027 (Baa1/BBB+) and Global Payments Inc.’s 1.5% convertible notes due 2031 (Baa3/BBB-) were again top traders during Tuesday’s session with Global Payments’ convertible notes continuing to improve.

Southwest Airlines Co.’s 1.25% convertible notes due May 1, 2025 (Baa1/BBB) saw the largest price movement during the session with the notes dropping outright but expanding on hedge as problems with Boeing sank the company’s stock.

MP Materials Corp.’s recently priced 3% convertible notes due 2030 sank further below par and contracted dollar-neutral with the notes one of the weaker performers among the deluge of recent deals.

High-grade trades

High-grade names again drove trading activity during Tuesday’s session with NextEra’s 3% exchangeable notes due 2027 and Global Payments’ 1.5% convertible notes due 2031 again the top traders of the session.

NextEra’s 3% exchangeable notes due 2027 were lower alongside stock although largely unchanged on hedge, a source said.

The 3% notes were changing hands at 102 versus a stock price of $57.19 in the late afternoon, according to a market source.

There was $54 million in reported volume.

NextEra’s stock traded to a low of $56.55 and a high of $58 before closing at $57.15, a decrease of 1.24%.

Global Payments’ 1.5% convertible notes due 2031 continued to improve on an outright and dollar-neutral basis.

The 1.5% notes were trading just shy of 104 versus a stock price of $131.16 in the late afternoon.

They continued to improve on hedge, a source said.

There was $84 million in reported volume.

Global Payments’ stock traded to a low of $130.55 and a high of $133.35 before closing at $133.11, up 2.19%.

Southwest up on hedge

Southwest’s 1.25% convertible notes due 2025 saw the largest price movement of the session with the notes dropping outright but expanding on hedge as problems with Boeing tanked the company’s stock.

The 1.25% convertible notes were down about 6 points outright with stock off more than 14%.

The 1.25% notes were trading at 101.5 versus a stock price of $29 early in the session.

They were trading at 101 versus a stock price of $28.93 in the late afternoon.

While lower outright, the notes were “holding like a rock” on hedge, a source said.

The notes expanded about 1 point dollar-neutral on the move down.

There was $42 million in reported volume.

Southwest’s stock traded to a low of $28.52 and a high of $30.78 before closing at $28.76, down 14.86%.

Stock plunged after the airline announced it would have to revise guidance for the current year due to Boeing’s delivery delays.

Boeing and Boeing supplier Spirit AeroSystems have grappled with a series of quality control issues over the past year that have impacted Boeing’s 737 Max planes program.

MP Materials weaker

MP Materials’ recently priced 3% convertible notes due 2030 continued to weaken in the aftermarket with the notes falling further below par and contracting dollar-neutral.

The 3% notes were down 2.25 points outright with stock off more than 3%.

They were trading at 97.125 versus a stock price of $14.75 in the late afternoon.

The notes contracted about 1 point dollar-neutral over the past few sessions, a source said.

There was $12 million in reported volume.

MP Materials’ stock traded to a low of $14.71 and a high of $15.39 before closing at $14.81, off 3.46%.

MP Materials’ 3% convertible notes were among the weakest of last week’s deals with the notes dropping well below par on their aftermarket debut.

The rare earth miner priced the $650 million issue at par on March 4 with the recent exercise of the greenshoe lifting the total deal size to $747.5 million.

Mentioned in this article:

Coinbase Global, Inc. Nasdaq: COIN

Global Payments Inc. NYSE: GPN

MP Materials Corp. Nasdaq: MP

NextEra Energy Partners LP NYSE: NEP

Southwest Airlines Co. NYSE: LUV

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