Fisker privately places convertible notes; Lucid, Rivian rise; PPL, Welltower weaker

By Abigail W. Adams

Portland, Me., July 10 – The convertibles primary market was dormant on Monday and is expected to remain quiet as earnings roll out.

However, Fisker Inc.’s private placement of $340 million two-year convertible notes with a single buyer piqued market players’ interest.

The private placement was a relatively cheap capital raise for the struggling EV maker with private placements a potential trend for companies searching for cheap financing alternatives.

Meanwhile, the secondary space was “anemic” on Monday with few making moves ahead of the launch of earnings.

Equity indexes launched the day mixed but eked out gains by the close with the Dow Jones industrial average up 210 points, or 0.62%, the S&P 500 index up 0.24%, the Nasdaq Composite index up 0.18% and the Russell 2000 index up 1.52%.

There was $43 million in reported volume about one hour into the session and $366 million on the tape shortly before the market close.

Investment-grade convertible notes continued to drive trading activity with PPL Corp.’s 2.875% exchangeable notes due 2028 (Baa1/BBB+) and Welltower Inc.’s 2.75% convertible notes due 2028 (Baa1/BBB+) continuing to move lower despite a strong day for Treasuries.

EV makers also remained in focus with Rivian Automotive Inc.’s 4.625% convertible notes due 2029 and Lucid Group Inc.’s 1.25% convertible notes due 2026 continuing their strong upward momentum.

Fisker’s private placement

Fisker announced a private placement of $340 million of two-year convertible notes with a single buyer on Monday.

The notes will be priced with an original issue discount of 11.8, a coupon of 0% and an initial conversion premium of 30%, according to a market source.

There is one buyer of the private placement offering with the investor given the ability to purchase an additional $226 million of the notes after one year.

Fisker may require the buyer to purchase an additional $113 million if the buyer exercises its right to the $226 million additional notes.

The terms of the private placement were widely circulated, which sources suspect was partly motivated to increase confidence in Fisker’s balance sheet.

The offering seemed like a cheap capital raise for the issuer given the private and illiquid nature of the notes, a source said.

The private placement comes on the heels of the release of disappointing production figures for the EV startup with Fisker announcing the production of 1,022 Ocean SUVs in the second-quarter, far below the 1,400 to 1,700 vehicles the company had projected.

The new notes may be a slight negative for the company’s 2.5% convertible notes due 2026, which continue to wallow in distressed territory.

Fisker’s 2.5% notes last traded on June 28 at 44.875 with a yield of 30.64%, according to Trace data.

Fisker’s stock was boosted by the news and closed Monday at $7.03, an increase of 17.17%.

IG dominates

High-grade convertible notes continued to dominate the tape on a slow day in the secondary space with the low-coupon, longer-duration convertible notes continuing to lose strength despite a strong day for Treasuries with yields coming in from recent heights.

PPL’s 2.875% convertible notes due 2028 saw heavy volume with the notes falling another 0.25 to 0.375 point outright.

The notes were trading at 94.875 versus a stock price of $26.11 in the late afternoon.

There was $25 million in reported volume.

PPL’s stock traded to a high of $26.34 and a low of $25.81 before closing at $25.96, off 0.95%.

Welltower’s 2.75% convertible notes due 2025 were off 0.5 point outright.

The notes were seen at par versus a stock price of $79.25 in the late afternoon.

There was $11 million in reported volume.

Welltower’s stock traded to a low of $78.32 and a high of $79.85 before closing at $79.17, down 0.80%.

High-grade convertible notes were under pressure the previous week as Treasury yields shot to multi-year highs on July 6 following an ADP Employment report that blew past expectations.

However, Treasuries saw a strong session on Monday with yields returning to their levels prior to the ADP report’s release.

EV focused

EV makers were in focus on Monday with Fisker’s private placement the only news to come out of the primary market and Rivian’s and Lucid’s convertible notes continuing their strong upward momentum in active trade.

Rivian’s 4.625% convertible notes due 2029 continued to add to the blockbuster gains of the previous week.

The 4.625% notes added another 2 points outright with stock up a little more than 3%.

The notes were trading at 150.25 versus a stock price of $25.28 late in the session, according to a market source.

There was $17 million in reported volume.

Rivian’s stock traded to a low of $23.58 and a high of $26.61 before closing at $25.51, an increase of 3.28%.

Rivian’s stock and convertible notes have been on fire since the company released production numbers that blew past expectations.

Lucid’s 1.25% convertible notes due 2026 added 1 point outright with stock up more than 6% on Monday.

The notes were trading at 66.625 in the late afternoon, a source said.

The yield was about 13.75%.

There was $9 million in reported volume.

Lucid’s stock traded to a low of $7.24 and a high of $7.97 before closing at $7.93, an increase of 6.44%.

Lucid’s stock and convertible notes have seen a surge in buying interest since the EV startup announced a new partnership with Aston Martin in late June.

The 1.25% convertible notes were trading on a 59-handle prior to the announced partnership.

Mentioned in this article:

Fisker Inc. NYSE: FSR

Lucid Group Inc. Nasdaq: LCID

PPL Corp. NYSE: PPL

Rivian Automotive Inc. Nasdaq: RIVN

Welltower Inc. NYSE: WELL

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