Morning Commentary: Priceline, salesforce.com move up in line with shares; Chesapeake quiet

By Rebecca Melvin

New York, Feb. 9 – U.S. convertibles in trade on Tuesday were a little bit higher on an outright basis in line with their underlying shares, with market players sticking mostly to shorter-dated, better-quality credits in light of uncertainty and volatility that have weakened equity markets.

Priceline Group Inc.’s 1% convertibles were up by more than a point on an outright basis to 120.5, according to Trace data, with shares of the Norwalk, Conn.-based travel site up about $17.00, or 1.8%.

Salesforce.com Inc. saw its convertibles higher with its stock up 6.6% after a rating upgrade by Jefferies to “hold” from “underperform.”

Salesforce.com’s 0.25% convertibles due 2018 traded back up to about 111 from 108.5 on Monday and 111 on Friday, as shares gained $3.53, or 6.6%, to $57.64.

Chesapeake Energy Corp.’s 2.5% convertibles due 2037, which are callable in 1.25 years, were quiet at about 23 early Tuesday, which was stable after their collapse by more than 50% on Monday amid fears that the Oklahoma City-based natural gas producer may have to file for Chapter 11 bankruptcy or significantly restructure its debt.

The company denied that it is considering bankruptcy, but it has hired law firm Kirkland and Ellis LLP as it looks for ways to strengthen its balance sheet following its recent debt exchange.

Prospect Capital Corp.’s convertibles remained quiet ahead of the New York-based venture capital and private equity firm’s quarterly results expected late Tuesday.

Prospect Capital is a serial issuer with five convertible senior note issues outstanding. Market players were taking a look at the company’s convertibles on Monday as shares dropped after word that the company may be under a potential inquiry by the Securities and Exchange Commission related to its collateralized loan obligations.

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