Whiting Petroleum’s 1.25% bonds pop; Qihoo firm; deals trickle through euro market

By Rebecca Melvin

New York, May 11 – Whiting Petroleum Corp.’s 1.25% convertibles were higher in active trade on Wednesday after the Denver-based oil and gas company said it is going to retire $476.3 million of convertible mandatories in four series, which doesn’t include the 1.25% bonds, a New York-based trader said.

The Whiting 1.25% bonds were higher at 71.875 to 72 compared to about 68.75 at the close on Tuesday.

They are up quite a few points as “people reach for Whiting paper,” the trader said.

Elsewhere, trading in convertibles was company specific. Qihoo 360 Technology Co. Ltd.’s convertibles remained active at pricing that was firm at the high end of the previous session’s range. The Qihoo 1.75% convertibles due 2021 traded at 95.75, which was up compared to the last trade on Tuesday at 95. On Tuesday that paper rose from 94.

The Qihoo 2.5% convertibles due 2018 were a touch higher at 99.1 compared to 98.9, according to Trace data.

The China PC and mobile internet security company’s convertibles are trading on the back of news that China regulators are scrutinizing its plan to delist from the U.S. stock market and list in China, a trader said.

Qihoo wants to relist in China to take advantage of higher valuations there, but regulators are looking at the market impact of the move.

SINA Corp.’s 1% convertibles due 2018 traded up slightly in line with the underlying shares to 99.1 ahead of the Shanghai-based social media company’s earnings report expected after the market close.

The SINA bonds had traded on Tuesday between 98.3 and 99.375. SINA shares were fractionally higher early Wednesday but fell about 3.6% in after-hours action after the company reported a wider-than-expected loss.

SolarCity Corp.’s 2.75% convertibles bounced back a little bit after plunging on Tuesday after the solar panel company reported a larger-than-expected first-quarter loss and cut its current-quarter and full-year guidance.

The SolarCity 2.75% convertibles due 2018 traded last at nearly 65 after dropping by more than 10 points to about 60 on Tuesday.

SolarCity shares also recovered some ground, closing up 87 cents, or 4.9%, to $18.69 after a 21% drop on Tuesday.

The U.S. primary market was silent again with no new issuance priced this week so far. But the European convertibles market continues to see deals trickle through.

On Wednesday, Berlin-based mobile advertising technology company RNTS Media NV priced an add-on of €50 million to an initial placement of €100 million of 5% senior unsecured convertible bonds that priced July 2015.

The Regulation S offering is fully subscribed and expected to settle within days.

Proceeds will be used to fund the company’s latest acquisition and support organic growth.

On Tuesday, Nexity priced €156.52 million of 0.625% convertible bonds due 2020 in the Oceane structure. The deal includes a 15% over-allotment option that could increase the issue size to €180 million.

Nexity is a Paris-based real estate development company.

So far this year, there has been €4.82 billion in new convertibles issuance in eight euro-denominated deals. That compares to only $2.61 billion in 12 deals in the U.S. primary convertible market.

Both markets are down drastically for the year so far compared to 2015. But low issuance isn’t only a convertibles problem. The U.S. high-yield bond market has also seen light issuance compared to the market’s usual size. So far this year, there has been new high-yield issuance of $68.39 billion in 90 deals, which is down 50% compared to last year’s $138.58 billion in 210 deals for the same period, according to Prospect News’ data.

Whiting pops

Whiting’s 1.25% convertibles traded up to nearly 72 on Wednesday after the company said that it is retiring nearly $500 million in mandatory issuance. The redemption was expected.

“I am not sure why they popped like that since it was expected given the announcement,” a trader said.

Whiting notified holders of four series of convertible senior notes that they will be converted into common stock in the company on May 18. The convertibles subject to mandatory conversion include $48,712,000 of 6.5% convertible senior subordinated notes due 2018; $96,812,000 of 5% convertible senior notes due 2019; $152,477,000 of 5.75% convertible senior notes due 2021; and $178,742,000 of 6.25% convertible senior notes due 2023.

Prior to the notice, about $400,000 of the notes had already been voluntarily converted by their holders.

In total, once the mandatory conversion takes place, Whiting will have issued about 41.8 million shares of its common stock to retire all $476.7 million of the convertibles. The convertibles were issued in March as part of an exchange of an equal principal amount of senior notes through private placements.

Holders of the affected notes may give notice to voluntarily convert their notes up to the close of business on May 17. If all holders of the convertibles voluntarily convert their notes, Whiting will make early conversion payments totaling about $41.9 million, plus accrued interest to the conversion date.

Holders who do not voluntarily convert their notes will not receive an early conversion payment or accrued interest.

Mentioned in this article:

Nexity Paris: NXI

Qihoo 360 Technology Co. Ltd. Nasdaq: QHOO

RNTS Media NV Frankfurt: RNM

SINA Corp. Nasdaq: SINA

SolarCity Corp. Nasdaq: SCTY

Whiting Petroleum Corp. NYSE: WLL

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