Alpha Natural convertibles trade around 3.5 after filing Chapter 11; energy names lower

By Rebecca Melvin

New York, Aug. 3 – Alpha Natural Resources Inc. was the name of the day in U.S. convertibles after the Bristol, Va.-based coal mining company filed to reorganize under Chapter 11 on Monday in the U.S. Bankruptcy Court for the Eastern District of Virginia.

The Alpha Natural 3.25% convertibles, which matured on Friday, had been trading at a little bit of a premium to the company’s other two convertible bonds in anticipation that they would be repaid, but after the filing the paper sank to about the same level of the other two, a New York-based trader said.

All three of the bonds traded at about 3.5, he said. A second source said however that the 3.25% convertibles maintained a slightly higher price of 5.5. But about two weeks ago, those bonds had been about 45.

Elsewhere, Whiting Petroleum Corp.’s convertibles were weaker again with lower oil prices and Chesapeake Energy Corp.’s 2.25% convertibles were quoted at 80.5, which was down another point from Friday’s last price.

On Monday, oil prices slid to six-month lows. Crude oil settled down $1.95, or 4.14%, at $45.17 a barrel. Brent fell below $50 a barrel for the first time since Jan. 30. Oversupply and growth worries continue to weigh on the sector.

BroadSoft Inc.’s 1.5% convertibles due 2018 were indicated down about 5 points to 101 as the common shares of the Gaithersburg, Md.-based telecom software maker slid 8% after it reported a second-quarter loss that was better than expected. The shares were last at $32.04, which was down $2.88, or 8.25%, on the day.

Alpha Natural in focus

Alpha Natural was “pretty much the name of the day” after the coal company filed its widely anticipated Chapter 11 bankruptcy filing.

The Alpha Natural 3.25% convertibles, which matured Aug. 1, traded at 5.5 and were also seen lower, sources said.

The securities had jumped to 45 from the mid 30s earlier this month amid optimism that the issue would be paid.

Alpha Natural’s 3.75% convertibles were offered at 3.5.

The Alpha Natural 4.875% convertibles were seen at 3.75 bid, 4 offered in the early going but traded last at 3.5, a Connecticut-based trader said.

Alpha Natural shares were weak at $0.2382.

Alpha said it has lined up a $692 million debtor-in-possession facility with an 18-month maturity.

Citigroup is the arranger for the DIP loan, and the facility will be led by a group of first- and second-lien lenders.

There was no additional news about hearing dates or the committee of unsecured creditors, but these milestones weren’t expected to generate too much activity.

“There is not too much action to be taken at these levels,” a trader said regarding the bond prices below the mid single digits.

“There was a marginal premium to the other bonds on the possibility that they would be paid off today, but they weren’t, so they are the same as all the other bonds,” a New York-based trader said.

The convertibles that were due Aug. 1 were the old Massey Energy convertibles. Alpha Natural acquired Massey in 2011, saddling itself with debt just before an extended downturn in coal prices.

Mentioned in this article:

Alpha Natural Resources Inc. NYSE: ANR

BroadSoft Inc. Nasdaq: BSFT

Chesapeake Energy Corp. NYSE: CHK

Whiting Petroleum Corp. NYSE: WLL

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