Morning Commentary: Fisker privately places convertible notes; secondary ‘anemic’

By Abigail W. Adams

Portland, Me., July 10 – The convertibles primary market was dormant on Monday although a private placement piqued market players’ interest.

Fisker Inc. plans to price $340 million of two-year convertible notes 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.

Private placements such as Fisker’s may become a growing trend as companies search for cheap financing alternatives.

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.

Meanwhile, the secondary space was “anemic” early Monday with equity markets mixed to start the day, a source said.

The Dow Jones industrial average was up 134 points, or 0.40%, the S&P 500 index was up 0.03%, the Nasdaq Composite index was down 0.10% and the Russell 2000 index was up 1.13% shortly before 11 a.m. ET.

There was $43 million in reported volume about one hour into the session with no name seeing concentrated trading activity.

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