Cobalt International drifts off; Oasis ‘still trading’; ServiceNow firms on takeover talk

By Stephanie N. Rotondo

Seattle, Oct. 19 – Trading in the convertible bond market was a little busier on Wednesday than on Tuesday, according to one New York-based trader.

He also noted that there were a few off-the-run names that were being eyed, at least in early trading.

Cobalt International Energy Inc. was one such name.

“When it trades well, it trades great; otherwise it doesn’t trade at all,” the trader said.

He pegged the 2.625% convertible notes due 2019 at 48.5, adding that the paper has been “drifting down from 53” for the last couple of weeks.

But another source said the issue rebounded up to 49.5.

The stock was also trending higher, rising 8 cents, or 9.3%, to $0.99.

Also in the oil and gas space, Oasis Petroleum Inc.’s 2.625% convertible notes due 2023 were also “still trading,” a trader said, continuing the trend set on Tuesday when the company publicly sold 48 million shares of common stock.

But while the paper was somewhat depressed in the previous session, the convertibles were “almost all the way back to where it opened yesterday morning,” a trader said.

He pegged the bonds at 115.36 versus a share price of $11.10.

Another market source placed the issue in a 116.5 to 117.5 context, which was up from previous levels in a 111 to 112 range.

On the stock side, the paper was up 62 cents, or 5.72%, at $11.19, which compared to a decline of nearly 6% on Tuesday.

Trading volume in the equity was well above average.

Gains in both the issues came as oil prices ticked up to a one-year high on the latest U.S. Energy Information Administration report that showed a 5.2 million drawdown in crude stockpiles last week.

Analysts polled by the Wall Street Journal had predicted a 2 million-barrel build.

ServiceNow gains

ServiceNow Inc.’s 0% convertible senior notes due 2018 were topical as it was reported that the cloud computing company was a potential takeover target of salesforce.com.

The convertibles were seen at 123.33 versus a share price of $80.00 at mid-morning. Most of the day’s trades occurred with a 123 handle, though the high tick of the day was 124.093.

The last round-lot trades occurred around a 118 level, according to a market source.

The equity improved $2.76, or 3.62%, to $78.92.

The news that indicated ServiceNow was on salesforce.com’s radar came from hacked e-mails linked to former secretary of state Colin Powell.

Powell is on salesforce.com’s board of directors.

One e-mail included a presentation – labeled “draft and confidential” – of 14 potential targets. ServiceNow was one such name.

Peabody climbs again

Coal producer Peabody Energy Corp. saw its 4.75% convertible junior subordinated debentures due 2066 continue to gain steam in midweek trading.

One trader said the name was “trading up a storm,” pegging the paper at 11.25 to 11.5.

Another trader saw the issue at 11.5 to 12.

The second trader said the gains were simply a continuation of the bankrupt company’s recent rise.

Last week, it was reported that the company had inked the highest contract for selling metallurgical coal in four years. The $200 a ton price tag was signed with Nippon Steel & Sumitomo Metal Corp.

The price will take effect in the fourth quarter. The highest price in the third quarter was $92.50 a metric ton.

Mentioned in this article:

Cobalt International Energy Inc. NYSE: CIE

Oasis Petroleum Inc. NYSE: OAS

Peabody Energy Corp. OTCBB: BTUUQ

ServiceNow Inc. NYSE: NOW

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