PG&E equity units active; AA improves; Intercept tanks; Chesapeake files for bankruptcy

By Abigail W. Adams

Portland, Me., June 29 – The convertibles primary market was quiet on Monday with no new deals launching.

With the new issue pipeline quiet, activity in the secondary space was also muted, a source said.

The convertibles primary and secondary markets are expected to remain quiet over the truncated holiday week with many cashing in vacation days around the July 4 holiday, a market source said.

There was $28 million on the tape for convertible bonds about one hour into the session and about $400 million about one hour before the market close.

PG&E Corp.’s 5.5% equity units remained active with the notes continuing to trade below par.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 were trading off their lows on Monday although the notes continued to struggle.

Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 were active and trading for pennies on the dollar after the company filed for bankruptcy.

While volume was light, Intercept Pharmaceuticals Inc.’s convertible notes tanked after the Food and Drug Administration did not approve its one of its drug candidates.

PG&E active

PG&E’s 5.5% equity units were among the most actively traded issues in the secondary space.

While the units continued to trade below par their second day in the secondary space, they were nominally improved dollar-neutral at the market close.

The units remained volatile and traded as low as 94 shortly after the opening bell.

However, they rebounded to trade on a 96-handle for the majority of the session.

The units were marked at 97 bid, 97.2 offered versus a stock price of $9.13 at the close, a market source said.

They were nominally improved dollar-neutral.

PG&E stock traded to a high of $9.29 and a low of $8.90 before closing the day at $9.06, a decrease of 0.77%.

The units have been volatile since opening for trade.

While the notes traded up 3 points outright and 2 points dollar-neutral on their secondary market debut last Friday, they closed the day on a 96-handle and gave back most of their dollar-neutral gains.

AA improves

American Airlines’ 6.5% convertible notes due 2025 remained the most actively traded bond in the secondary space, as they have been since pricing on June 22.

The 6.5% notes were trading off their lows as stock shot up on a strong day for the travel and leisure industries.

The notes gained about 5 points outright.

They were changing hands at 94.25 versus a stock price of $13.15 in the late afternoon, according to a market source.

The notes improved by about 0.5 point dollar-neutral.

However, they were still down more than 5 points dollar-neutral since pricing.

There were $26 million bonds on the tape by the late afternoon.

American Airlines stock traded to a high of $13.51 and a low of $12.02 before closing the day at $13.32, an increase of 7.59%.

Monday was a strong day for the travel and leisure industries as housing sales figures gave investors renewed confidence in a speedy economic recovery, even as Covid-19 cases continue to rise.

Chesapeake bankrupt

Chesapeake Energy’s 5.5% convertible notes due 2026 were active on Monday with the notes trading for pennies on the dollar.

The 5.5% convertible notes were changing hands between 2.5 and 3 during Monday’s session.

The yield on the notes was 173%, according to a market source.

The bonds saw about $10 million in reported volume.

Chesapeake filed for Chapter 11 bankruptcy protection on Sunday, a move that was widely anticipated, sources said.

While volume has been light, the convertible notes have traded in the single digits since mid-March.

Chesapeake Energy priced $1.25 billion of the 5.5% convertible notes in September 2016.

The notes have $1.09 billion outstanding, according to Trace data.

The company’s stock is set to be delisted from the New York Stock Exchange.

Intercept tanks

Intercept’s convertible notes tanked on an outright basis as stock got crushed after the FDA failed to approve one of its drug candidates.

Intercept’s 2% convertible notes due 2026 dropped more than 27 points on an outright basis.

The notes traded down to a 71-handle on Monday.

They closed Friday at 97.

Intercept’s 3.25% convertible notes due 2023 dropped 7 points outright to a 74-handle, according to a market source.

Intercept stock traded to a high of $50.00 and a low of $44.50 before closing the day at $46.70, a decrease of 39.73%.

Intercept was taking a hit on Monday after the FDA sent the pharmaceutical company a complete response letter for its application for a treatment for the fatty liver disease NASH.

The FDA requested additional information to support the accelerated approval process for the treatment.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

Chesapeake Energy Corp. NYSE: CHK

Intercept Pharmaceuticals Inc. Nasdaq: ICPT

PG&E Corp. NYSE: PCG

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