Winnebago convertibles on deck; Spirit Airlines nosedives, JetBlue gains continue

By Abigail W. Adams

Portland, Me., Jan. 17 – The convertibles primary market returned to action on Wednesday with one refinancing deal set to price before the holiday-truncated week comes to a close.

Winnebago Industries Inc. plans to price $300 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Goldman Sachs & Co. LLC and BMO Capital Markets Corp. are bookrunners for the Rule 144A offering, which carries a greenshoe of $45 million.

Meanwhile, the secondary space remained active on Wednesday with topical news continuing to spark activity as a risk-off sentiment swept through markets.

Equity indexes were in the red as Treasury yields rose with the market dialing back its rate cut expectations after a stronger-than-anticipated retail sales report.

The Dow Jones industrial average closed Wednesday down 94 points, or 0.25%, the S&P 500 index closed down 0.56%, the Nasdaq Composite index closed down 0.59% and the Russell 2000 index closed down 0.73%.

There was $70 million in reported convertible bond trading volume about one hour into the session and $582 million on the tape about one hour before the market close.

JetBlue Airways Corp.’s 0.5% convertible notes due 2026 and Spirit Airlines, Inc.’s 1% convertible notes due 2026 continued on their disparate trajectories after their merger was blocked by a federal judge on antitrust concerns.

JetBlue’s 0.5% convertible notes continued to rise while Spirit Airlines’ 1% convertible notes again nosedived in heavy volume.

Outside of JetBlue and Spirit Airlines, activity was concentrated in high-grade names with Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB), Evergy Inc.’s 4.5% convertible notes due 2027 (Baa2/BBB) and American Water Capital Corp.’s 3.625% exchangeable senior notes due 2026 (Baa1/A) softer in heavy volume.

Federal Realty OP LP’s 3.25% exchangeable notes due 2029 (/BBB+), the last deal to clear the primary market, were also lower in heavy volume with the notes now trading well below par.

Different trajectories

The surprise outcome of the Department of Justice’s antitrust trial challenging JetBlue’s acquisition of Spriit Airlines continued to reverberate through the market.

JetBlue’s 0.5% convertible notes due 2026 continued their upward momentum on the news while Spirit Airlines’ 1% convertible notes due 2026 nosedived to a fresh low.

JetBlue’s 0.5% convertible notes due 2026 gained another 2 points in heavy volume.

They were trading at 78.875 in the late afternoon with the yield about 11.625%, according to a market source.

There was $37 million in reported volume.

Spirit Airlines’ 1% convertible notes due 2026 sank another 7 to 8 points after a 25-point fall the previous session.

The notes were trading in the 32 to 33 context with a yield of more than 56%, a source said.

The trading level marked a new historic low for the notes.

There was $32 million in reported volume.

While not equity sensitive, JetBlue’s and Spirit Airlines’ stocks were both under pressure on a rough day for equities.

JetBlue’s stock closed Wednesday at $4.68, a decrease of 8.67%. Spirit Airlines’ stock closed Wednesday at $6.14, a decrease of 22.47%.

JetBlue’s 0.5% convertible notes were trading around 70 and Spirit Airlines’ 1% convertible notes were trading on a 67-handle prior to the verdict in the antitrust trial, which broke mid-session on Tuesday.

High-grade weakens

High-grade names were weaker in heavy volume on Wednesday as the market dialed back its rate cut expectations following stronger-than-anticipated retail sales figures.

Duke Energy’s 4.125% convertible notes were off about 0.375 point outright.

The notes were trading just north of 100.375 versus a stock price of $97.88 early in the session and continued to trade around 100.375 in the late afternoon, according to a market source.

There was $20 million in reported volume.

Duke’s stock traded to a high of $98.69 and a low of $95.97 before closing at $96.83, a decrease of 1.22%.

Evergy’s 4.5% convertible notes due 2027 were off about 0.75 point outright.

The notes were changing hands at 102.875 early in the session, a source said.

They were trading at 102.375 versus a stock price of $52.53 in the late afternoon.

There was $22 million in reported volume.

Evergy’s stock traded to a low of $51.65 and a high of $52.91 before closing at $51.79, down 2.02%.

American Water’s 3.625% exchangeable notes due 2026 were off about 0.5 point outright.

The notes were trading at 99 versus a stock price of $128.15 in the late afternoon.

There was $23 million in reported volume.

American Water’s stock traded to a low of $127.44 and a high of $130.89 before closing at $128.42, a decrease of 1.53%.

Below par

Federal Realty’s 3.25% exchangeable notes due 2029 dropped well below par in active trade on Wednesday.

The 3.25% notes were off about 0.75 point outright.

They were changing hands at 99 versus a stock price of $99.75 in the late afternoon, according to a market source.

There was $18 million in reported volume.

Federal Realty’s stock traded to a high of $102.25 and a low of $99.44 before closing at $100.24, a decrease of 1.63%.

The notes were the last deal to clear the primary market with the $485 million issue pricing at par on Jan. 8.

The notes had largely been wrapped around par since pricing.

Mentioned in this article:

American Water Works Co., Inc. NYSE: AWK

Duke Energy Corp. NYSE: DUK

Evergy Inc. Nasdaq: EVRG

Federal Realty Investment Trust NYSE: FRT

JetBlue Airways Corp. Nasdaq: JBLU

Spirit Airlines, Inc. NYSE: SAVE

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