Morning Commentary: DISH convertibles gain in heavy volume as straight debt destroyed

By Abigail W. Adams

Portland, Me., Jan. 10 – The convertibles primary market remained quiet early Wednesday with the lack of new deal announcements a disappointment to some.

However, the Thursday release of the Consumer Price Index report and the launch of earnings season were bound to put a damper on dealmaking with the real floodgates expected to open as issuers come out of their blackouts.

Equity and Treasury markets were largely flat early Wednesday with all eyes on the latest piece of inflationary data as markets attempt to project rate cuts.

The Dow Jones industrial average was up 73 points, or 0.19%, the S&P 500 index was up 0.23%, the Nasdaq Composite index was up 0.41% and the Russell 2000 index was down 0.32% shortly before 11 a.m. ET.

While broader markets were in a holding pattern ahead of the CPI print, topical news sparked heavy volume in early trade.

There was $132 million in reported convertible bond trading volume about one hour into the session with activity heavily concentrated in a single name – DISH Network Corp.

DISH’s convertible notes were in focus after the company announced a shuffling of assets with the company’s unencumbered wireless spectrum licenses transferred from DISH Network to a newly formed subsidiary.

While the news tanked DISH’s straight debt with the company’s senior notes plunging 8 to 10 points, DISH’s convertible notes improved.

DISH’s 0% convertible notes due 2025 gained 4 to 5 points on the news. They traded up to 65 early in the session, sources said.

There was $25 million in reported volume.

The 3.375% convertible notes due 2026 rose 2 to 3 points. They were changing hands at 53 with a yield of 31% in early trade.

There was $15 million in reported volume.

While not equity sensitive, EchoStar Corp.’s stock skyrocketed early Wednesday and was trading at $16.11, an increase of 27.25%, shortly before 11 a.m. ET.

DISH’s convertible notes became convertible into EchoStar’s stock following the completion of the DISH/EchoStar merger on Jan. 2.

DISH’s asset reshuffle also involved moving an intercompany loan from DISH DBS to the newly formed subsidiary.

DISH’s convertible notes soared following the news while its senior notes tanked due to their position in the capital structure, a source said.

DISH seemed to be dividing its assets post-merger so the company’s bad debt rested in the weaker company, a source said.

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