Aspen Aerogels convertibles on tap; Illumina, Western Digital active; Li Auto up on swap

By Abigail W. Adams

Portland, Me., June 28 – While few were expecting it, the convertibles primary market again showed activity on Tuesday with a new offering as the second quarter comes to a close.

Aspen Aerogels, Inc. plans to price $150 million of five-year green convertible notes after the market close on Wednesday with price talk for a coupon of 6% to 6.5% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

Barclays, Jefferies LLC and BofA Securities Inc. are joint bookrunners for the Securities and Exchange Commission-registered offering, which carries a greenshoe of 22.5%.

Meanwhile, it was another quiet day in the convertibles secondary space with the bears regaining control of equities after a choppy start.

After wavering between gains and losses early in the session, indexes closed the day deep in the red.

The Dow Jones industrial average closed Tuesday down 491 points, or 1.56%, the S&P 500 index closed down 2.01%, the Nasdaq Composite index finished down 2.98% and the Russell 2000 index closed down 1.86%.

Indexes were pointing to a strong start on news China was lifting its Covid restrictions.

However, end-of-quarter repositioning sparked a fresh round of selling in equities despite continued stability in rates, a source said.

However, there was little movement in the secondary space with few buyers or sellers in the market, sources said.

Many appeared to be riding out the remainder of the quarter and ready to close the books on a brutal first half of the year.

There was $45 million in reported convertibles trading volume about one hour into the session and $366 million on the tape about one hour before the market close.

Illumina Inc.’s 0% convertible notes due Aug. 18, 2023 (BBB) and Western Digital Corp.’s 1.5% convertible notes due Feb. 1, 2024 (Baa3) continued with the short-duration notes offering attractive yields for investment-grade paper.

Airbnb Inc.’s 0% convertible notes due 2026 were also active although with little movement in price.

Li Auto Inc.’s 0.25% convertibles due 2028 were down outright but up on swap after the Beijing-based electric vehicle manufacturer announced a new equity offering.

For the yield

Illumina’s 0% convertible notes due Aug. 18, 2023 and Western Digital’s 1.5% convertible notes due Feb. 1, 2024 continued to see heavy volume with the notes trading for their yield.

Illumina’s 0% convertible notes continued to trade around 95.5 with the yield about 4.04%.

“For one year, that’s not bad for IG paper,” a source said.

There was $27 million in reported volume.

Western Digital’s 1.5% convertible notes due 2024 were changing hands at 95.25 in the late afternoon.

The notes were yielding 4.633%.

There was $12 million in reported volume.

The notes were switching hands with accounts repositioning as the end of quarter approaches and the notes reach their maturity.

Airbnb active

Airbnb’s 0% convertible notes due 2026 were active during Tuesday’s session with the notes down outright but unchanged dollar-neutral.

The 0% convertible notes were down about 0.5 point outright with stock off almost 4%.

They were seen at 83.625 versus a stock price of $97.53 in the late afternoon.

The notes were moving in line dollar-neutral, a source said.

There was $15 million in reported volume.

Airbnb’s stock traded to a high of $105.45 and a low of $97.09 before closing the day at $97.53, a decrease of 3.91%.

Li up on swap

Li Auto’s 0.25% convertible notes due 2028 were down outright but up dollar-neutral with the company’s equity under pressure after a secondary offering.

The notes were down 6 points outright with equity off 5%.

The notes were changing hands at 147 versus an equity price of $37.31 early in the session.

They traded down to 145 heading into the afternoon.

While lower outright, the notes gained 1.5 points dollar-neutral on the move down, a source said.

Li’s American Depositary Shares traded to a high of $38.33 and a low of $36.16 before closing the day at $37.07, a decrease of 5.26%.

The Beijing-based electric vehicle manufacturer’s American Depositary Shares were under pressure after the company announced a $2 billion at-the-market equity offering.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

Illumina Inc. Nasdaq: ILMN

Li Auto Inc. Nasdaq: LI

Western Digital Corp. Nasdaq: WDC

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