Morning Commentary: Lumentum convertible notes price, volatile on aftermarket debut

By Abigail W. Adams

Portland, Me., March 4 – New paper was the focus of the convertibles secondary space on Friday as another new offering made its aftermarket debut.

Lumentum Holdings Inc. priced $750 million of convertible notes due June 15, 2028 after the market close on Thursday at par with a coupon of 0.5% and an initial conversion premium of 32.5%.

Pricing came at the midpoint of talk for a coupon of 0.375% to 0.875% and at the rich end of talk for an initial conversion premium of 27.5% to 32.5%, according to a market source.

The new paper dominated activity in the secondary space and swung between outright gains and losses on another red day for equities.

Lumentum’s 0.5% notes traded to a high of 101 and a low of 98.5 early in the session, a source said.

It was changing hands at 99 versus a stock price of $96.25 about one hour into the session.

The new paper accounted for $85 million of the $152 million in reported convertibles secondary trading volume on the tape.

Lumentum’s stock was changing hands at $96.16, a decrease of 2.76%, shortly before 11 a.m. ET.

The new paper hit the secondary space as the sell-off in equities intensified following reports that Russia had attacked Europe’s largest nuclear power plant in the Ukraine.

“Nobody wants to carry risk into the weekend,” a source said.

The Dow Jones industrial average was down 475 points, or 1.41%, the S&P 500 index was down 1.64%, the Nasdaq Composite was down 1.85% and the Russell 2000 was down 1.51% shortly before 11 a.m. ET.

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