Morning Commentary: Convertibles holding as markets plunge; Whiting Petroleum eyed

By Abigail W. Adams

Portland, Me., March 9 – Monday is shaping up to be a historic day for markets as cratering oil futures sparked a full-blown sell-off in equities, temporarily halting stock trading as indexes plunged more than 7% shortly after the opening bell.

When trading resumed, equities were down a little over 5%, which some saw as an encouraging sign.

“We’re holding here,” a market source said. “It’s encouraging; it took a little while to hit 7% and now it’s kind of rallying.”

However, those conditions were expected to quickly change. Market players were evaluating various asset classes before making their next move.

The convertibles secondary space was practically at a stand-still amid the market turmoil.

There was $27 million in reported volume about one hour into the session with Booking Holdings Inc.’s 0.9% convertible notes due 2021 accounting for almost one half of the volume on the tape, a market source said.

The 0.9% notes dropped about 3 points outright to 106.5 early in the session. The notes were moving into outright hands as they approached par, a source previously said.

Booking Holdings stock was $1,536.55, a decrease of 4.69%, shortly before 11 a.m. ET.

While no trades were on the tape early Monday, Whiting Petroleum Corp.’s 1.25% convertible notes due April 1, 2020 were being eyed as crude oil futures plummeted the most since the 1991 Gulf War.

The 1.25% convertible notes were active last Friday and traded off 9 points outright to the low 80s.

The notes mature in less than three weeks, and the company has only about $8 million in cash on the books, a market source said.

“The senior bond holders won’t let it (the convertible note) get paid off. They may have to file,” the source said.

WTI crude oil futures were $33.55, a decrease of $7.73 or 18.73%, and Brent crude oil futures were $36.40, a decrease $8.87 or 19.59%, shortly before 11 a.m. ET.

Crude oil futures plummeted on Monday as Saudi Arabia launched a price war in retaliation for Russia’s opposition to OPEC’s planned production cut.

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