Convertibles better in light volume; some energy names miss rally; Helix pops; Pernix drops more

By Rebecca Melvin

New York, March 17 – U.S. convertibles were generally better bid but volumes remained low on Thursday, as an ongoing rebound in oil prices helped some but not all energy names post gains.

“I’m not noticing a meaningful change in some of these busted energy names like Cobalt International Energy Inc., Whiting Petroleum Corp. and Cheniere Energy Inc.,” a New York-based trader said.

A busted convertible is one that is trading well below its conversion value and acts more like a straight bond than a hybrid security because the so-called stock option is broken, or busted.

Cobalt’s 3.125% convertibles due 2024 were quiet in the early going Thursday, but eventually tacked on a point to close at 44.75, against shares of the Houston-based energy exploration and production company that gained 19 cents, or 6%, to $3.40.

But Chesapeake Energy Corp. has been an exception to the trend in energy names and has regained significant ground since its lows in the depths of February. The Chesapeake 2.5% convertibles due 2037 jumped to as high as 72.75 on Thursday, which was up from 68 to 71 on Wednesday. Shares of the Oklahoma City-based natural gas company gained another 40 cents, or 9%, to $4.79. Two weeks ago, the price of the Chesapeake $2.5% convertibles was 53.75.

Crude oil prices hit their year-to-date highs on Thursday, with the front month in West Texas intermediate crude settling up above $40.00 per barrel at $40.20 per barrel, representing a 4.5% climb on the day. The move upward in oil has been ongoing for the better part of two weeks. Thursday’s move was attributed to growing optimism that the supply glut will dissipate as world oil producers are said to be showing more resolve about implementing production controls when they meet April 17. Two weeks ago, the price for the WTI front month was below $35.00 per barrel.

Outside of the energy sector, the majority of the day’s trading was prompted by company-specific news, and issues moved higher or lower depending on the share moves. But overall, valuations were seen to have expanded slightly by 0.215 point to 0.25 point on the day, a trader said.

The improvement followed equities, which have moved up following Wednesday’s Federal Reserve policy statement that indicated policy makers remain very cautious about pulling away from accommodative practices too soon.

“I’m not sure if the Fed had any impact on the tone or not because let’s face it, this rally has been going on since the third week of February,” a trader said.

Helix jumps

One name-specific convertibles trade was Helix Energy Solutions Group Inc., and that company’s 3.25% convertibles due 2032 surged about 10 points to 83 as shares of the Houston-based offshore oil services company shot up 8 cents, or 19%, to $5.48.

Prompting the Helix move appeared to be a share upgrade to “overweight” from “equal weight” by Morgan Stanley & Co.

Pernix down again

But Pernix Therapeutics Holdings Inc. continued to drop. The Pernix 4.25% convertibles slid below the 40 mark, closing the day at 37, which was down from 40.5 on Wednesday, according to a market source.

Shares of the Morristown, N.J.-based specialty pharmaceutical company fell another 14% to $0.99. The shares have plunged 57% since the company reported its fourth-quarter results, including a large income loss, on March 10.

Ctrip steady as stock drops

Ctrip.com International Ltd. convertibles were bouncing around but mostly unchanged early Thursday as shares traded in negative territory after the China-based online travel company reported unaudited fourth quarter and full year 2015 financial results.

The company reported big gains in revenue and earnings for the quarter ended Dec. 31, with revenue at RMB 2.9 billion, or $444 million, which was higher by 50% from the year-earlier period, while net income at RMB 76 million, or $12 million, which compared to a loss of RMB 224 million, or $36 million, in the same period a year earlier.

Ctrip’s shorter-dated 1.25% convertible, or the B tranche, was bouncing around but mostly within its previous range, wrapped about 123. Ctrip shares were lower by $1.12, or 2.6%, at $41.49.

Overall, the market was described as “slow,” with light volumes as St. Patrick’s Day added another distraction to convertibles where light volume has been a theme in light of a lack of new issuance.

“Light volumes persist but the market is generally better to buy,” a trader said.

Mentioned in this article:

Cheniere Energy Inc. NYSE: LNG

Chesapeake Energy Corp. NYSE: CHK

Cobalt International Energy Inc. NYSE: CIE

Ctrip.com International Ltd. Nasdaq: CTRP

Helix Energy Solutions Group Inc. NYSE: HLX

Pernix Therapeutics Holdings Inc. NYSE: PTX

Whiting Petroleum Corp. NYSE: WLL

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.