Morning Commentary: Peabody convertibles near zero as potential bankruptcy looms; Chesapeake steady

By Rebecca Melvin

New York, March 16 – Peabody Energy Corp., the St. Louis-based coal producer, delayed the interest payments on two notes and warned that it may have to seek Chapter 11 bankruptcy protection if it cannot negotiate an agreement with creditors.

The Peabody Energy 4.25% convertibles due 2066 had already been trading around 1, so the news didn’t spark any great price move. In fact, some of the bonds traded on Tuesday between 0.6 and 1, but they did not trade on Wednesday, a Connecticut-based trader said.

Peabody shares were down 42% at $2.33, however.

The delayed interest payment triggers a 30-day grace period. In its regulatory filing, Peabody said uncertainty around global coal fundamentals and economic growth concerns of some countries that import coal as well as the potential for additional regulatory requirements on coal producers were reasons for the notice.

Chesapeake Energy Corp. continued to trade favorably, with the Chesapeake 2.5% convertibles last at 68.625 as oil prices turned upward.

On Tuesday, the bonds bounced around mostly between 67.25 and 69.

Chesapeake shares were up 24 cents, or 5.74%, at $4.42 in early Wednesday trading.

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