Morning Commentary: Global sell-off, weaker oil hampers convertibles; Iconix down; Cobalt weak

By Rebecca Melvin

New York, Jan. 6 – A global sell-off of stocks and weaker oil pressured some convertibles in early trading Wednesday.

World equity markets, already jittery about China’s economic growth prospects and Middle Eastern tensions, were slammed by North Korea’s announcement that it successfully tested its first hydrogen bomb. This shocking development was doubted by some in the international community, but there was consensus that the small communist nation’s intension is to continue to pursue a nuclear arms program regardless of international opinion.

Iconix Brand Group Inc.’s 2.5% convertibles due 2016 were down for the count after dropping hard on Tuesday. The Iconix bonds traded at 82.75 bid, 83 offered early Wednesday. This paper had been in the lower 90s in December.

Shares of the New York-based brand management company were at $6.43, which was little changed on the day, but still up after jumping more than 20% last week.

Cobalt International Energy Inc. was weak again. The 3.125% convertibles traded at 48.5 early Wednesday. Shares of the Houston-based oil and gas exploration and production company were down 30 cents, or 6%, at $4.80.

Whiting Petroleum Corp.’s 1.25% convertibles traded down more than a point to 67 with shares of the Denver-based energy E&P company down 83 cents, or 9%, at $8.21.

West Texas Intermediate crude oil for February delivery fell $1.56, or 4%, to $34.41 on the New York Mercantile Exchange on Wednesday.

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