Morning Commentary: Convertibles quiet as equities drop; Ares Capital, Restoration Hardware active

By Rebecca Melvin

New York, Dec. 11 – U.S. convertibles were mostly quiet on Friday as oil prices slid lower and the slow grind to year-end remained underway.

“People are scared to do anything right now. Even the guys that are doing OK are reticent to step in and buy someone else’s pain. They don’t want to see anything banged up on someone else’s pad, they don’t even want to look at it,” a New York-based trader said.

The International Energy Agency reported Friday that the global oversupply of oil could worsen next year. The report sent crude oil prices lower, with West Texas Intermediate crude for January delivery down 68 cents, or 1.9%, at $36.08 per barrel at late morning. Stock markets fell, with the S&P 500 stock index down 1.4% in the face of oil around $36.00.

Ares Capital Corp.’s convertible bonds traded in size on Friday morning, with the underlying shares of the New York-based business development company down about 5%. Ares has about five convertible bond issues outstanding. The Ares 5.75% convertibles due 2016, which are due Feb. 2, 2016, traded around par.

Restoration Hardware Holdings Inc.’s two 0% convertibles due in 2019 and 2020 were both trading although shares of the Corte Madera, Calif.-based specialty retailer were little changed.

There were also a few SunEdison Inc. convertibles changing hands against shares that were 3% higher. The SunEdison 2.75% convertibles due 2021 traded at 47, which was up from 45 or 46 on Wednesday.

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