Morning Commentary: Convertibles quiet after softening earlier in the week; energy names weaker

By Rebecca Melvin

New York, Sept. 15 – U.S. convertibles were trading a bit quieter early Thursday on the heels of some softening in the market earlier in the week and as some of the newer big issues settle into the fabric of the secondary market, a Connecticut-based convertibles trader said.

There was some focus on energy names as oil prices dropped this week, although oil pricing was stable and up a little bit early Thursday.

Energy names that have traded included Cobalt International Energy Inc. and Weatherford International Ltd. The Cobalt convertibles were active on Wednesday and a bit weaker, trading around 45, a trader said.

Part of the softening was attributed to a big windfall of supply that hit the market last week. Five new deals launched and priced in the U.S. convertibles primary market for $2.33 billion in base-deal proceeds, or $2.61 billion if over-allotment options are exercised. Among those deals were Ctrip.com International Ltd.’s $900 million of 1.25% convertibles due 2022 and Advanced Micro Devices Inc.’s $700 million of 2.125% convertibles due 2026.

A couple of energy issuers have also come to market in the past week. Denver-based PDC Energy Inc. priced a $175 million issue of 1.125% convertible due 2021, and early Wednesday Houston-based Oasis Petroleum Inc. priced $275 million of 2.625% convertibles due 2023.

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