Holidays pressure convertible bond market activity; Forestar slightly better on merger news

By Stephanie N. Rotondo

Seattle, April 17 – The convertible bond market had not yet recovered from the long Easter weekend, according to one market source, as the Passover holiday continued to keep some players from their desks.

Not even an all-cash merger deal could get investors to pounce on Forestar Group Inc., the sellsider said.

He noted that the 3.75% convertible notes due 2020 “were at par before [the news] and they were at par after.”

DISH Network Corp. did remain busy, however. The company’s convertibles were trending lower on the day, as was the stock.

The paper had gained ground last week on news that AT&T Inc. had offered to buy Straight Path Communications Inc. in an all-cash deal valued at a significant premium. Given DISH’s inventory of wireless spectrum – which it is not using – many wondered what the company’s next move will be.

News that DISH had paid $6.2 billion for more wireless airwaves at auction only served to increase the speculation that perhaps DISH was looking to make itself attractive for a buyer – or that it planned to use the wireless waves in some way.

Meanwhile, oil names were drifting lower as domestic crude prices dipped 1%.

Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 were pegged at 101.5 bid, 102 offered, down from 103 at the open and from 104.25 on Thursday.

Another market source called the paper down nearly 3 points at 101.5.

The company’s stock declined 20 cents, or 3.4%, to $5.69.

Cobalt International Energy Inc.’s 3.125% convertible notes due 2024 were also weaker, falling to 26 from 29.25.

But the underlying equity did manage to tick up a touch, rising a penny, or 2.22%, to 46 cents.

Forestar, Starwood merging

Forestar Group’s 3.75% convertibles were slightly better after it was announced the company was combining with Starwood Capital Group.

A market source placed the issue at 110.25. The convertible bonds were trading about a point less than that on Thursday.

The underlying equity added a nickel to $14.20.

The merger was announced on Wednesday. Starwood will pay $14.25 per share in cash for all outstanding Forestar stock, totaling $605 million.

The price per share represents an 8.2% premium over the company’s 90-day volume weighted average price.

The buyout came on the heels of a restructuring effort that saw Forestar reducing costs and debt, as well as exiting non-core businesses to focus on core assets.

The deal is expected to close in the third quarter of 2017. Because of the combination, Forestar will not announce first-quarter earnings.

Forestar is an Austin, Texas-based residential and mixed-use real estate development company.

DISH debt dips

DISH Network was losing steam on Monday, as the market continued to ponder what the Englewood, Colo.-based satellite services provider plans to do with its sizable inventory of wireless spectrum.

At one desk, the 3.375% convertible notes due 2026 were called off 6.5 points at 113.875.

At another desk, those convertibles were seen in a 115 to 115.375 range, though there were highs with a 118 handle during the session.

The 2.375% convertible notes due 2024 meantime fell below par, which compared to a 102 to 103 context on Thursday.

That issue was not as active as the 3.375% convertibles.

The company’s shares were also retreating, sliding $3.59, or 5.76%, to $58.79.

Over the weekend, it was reported that DISH had recently bought up $6.2 billion in wireless spectrum at a government auction.

Only T-Mobile US bid more for the assets, spending $8 billion on new airwaves.

Verizon and Sprint did not participate in the auction at all. But given chatter that Verizon might be a good partner for DISH, the latter’s spectrum purchase only increased the buzz.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Cobalt International Energy Inc. NYSE: CIE

DISH Network Corp. Nasdaq: DISH

Forestar Group Inc. NYSE: FOR

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.