Liquidity picks up; Newmont trades at premium to parity; Chesapeake Energy paper active

By Stephanie N. Rotondo

Seattle, Dec. 20 – Trading in the convertible bond market remained lower than usual early Tuesday but was better than that seen on Monday, a trader said.

As of mid-morning, a total of $69 million bonds had traded, according to the trader. That compared to $33 million traded as of the same time on Monday.

Newmont Mining Corp.’s 1.625% convertible notes coming due July 15, 2017 were on the active side, trading with a 101 handle, a trader said.

However, the trader added that parity was 69, meaning the issue is trading at a negative yield to maturity.

“That makes no sense,” he said. “Unless somebody is trying to add investment-grade paper to their portfolio, it makes no sense.”

Another market source saw the issue trading between 101.7 and 101.9. At those levels, the YTM was minus 1.382% to minus 1.729%.

As for the underlying equity, it was down 12 cents at $31.66.

Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 were also somewhat busy, as the Oklahoma City-based oil and gas producer announced yet another asset sale.

A trader quoted the bonds at 111.375 bid, 111.75 offered.

A second source saw the paper at 111 bid, 111.5 offered, up 1 to 2 points on the day.

The stock was initially higher but ended the session off 2 cents at $7.29.

Chesapeake said on Tuesday that it was selling off another part of its Haynesville Shale assets, just two weeks after the company said it had sold off another portion.

The latest sale – to an affiliate of Covey Park Energy LLC – will bring in $465 million. The previous sale was for $450 million.

Combined, the assets sales bring Chesapeake close to hitting its target of $1 billion.

The above-par levels are also due in part to rising oil prices. But a trader noted that the name also became “more attractive” in the wake of the various debt exchanges the company has done this year.

Sucampo on deck

The primary market was quiet on Tuesday, though it was preparing for Sucampo Pharmaceuticals Inc.’s $225 million offering of five-year convertible senior notes.

Price talk was for a 2.75% to 3.25% yield and a conversion premium of 25% to 30%.

An investor call was held Tuesday morning, with pricing expected thereafter. As of press time, however, details had not emerged.

The company’s stock wasn’t faring well ahead of pricing, falling $3.43, or 20.51%, to $13.27.

Conversions will be in class A common stock.

The Rockville, Md.-based biopharmaceutical company intends to use the proceeds, along with cash on hand, to repay amounts due under a senior secured credit facility, including all accrued interest and a prepayment premium. Any remaining funds will be used for general corporate purposes.

Sucampo is the latest in a string of deals that have hit the market in December. Not counting Sucampo’s planned deal, issuers have raised $3.66 billion from 12 convertible debt transactions this month.

That accounts for just over 10% of the year’s market share.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Newmont Mining Corp. NYSE: NEM

Sucampo Pharmaceuticals Inc. Nasdaq: SCMP

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