Energy-related convertible bonds gap lower; market weaker as equity, oil routs continue

By Rebecca Melvin

New York, Jan. 15 – Energy convertibles were getting clobbered again on Friday, and the rest of the market was weaker as oil prices and the U.S. and global equity markets plunged again.

Energy paper couldn’t hold in because “you can’t value their assets just now,” a New York-based trader said as to why some of those convertibles were melting down.

West Texas Intermediate crude oil for February delivery closed down $1.78, or 5.7%, to $29.42 per barrel on Friday. On Monday it had dropped 5.3% to $31.41 per barrel.

Cobalt International Energy Inc. has not held, he said, because of fear, but Restoration Hardware Holdings Inc.’s 0% convertibles due 2019 traded down in an orderly fashion, he said.

Whiting Petroleum Corp.’s 1.25% convertibles traded at 54.25 on Friday, compared to a close on Monday at 62. Shares of the Denver-based oil and gas exploration and production company fell 15% on Friday to a close of about $5.70. On Monday the shares closed down 6.3% to $7.28.

Chesapeake Energy Corp. shares fell 24% this past week. The convertibles of the Oklahoma City-based oil and natural gas company were last seen around the 50 mark.

A smaller name, Hornbeck Offshore Services Inc. saw its 1.5% convertible slide below 50. It traded on Friday at 47.

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