Peabody Energy convertibles the top trader, bonds higher outright; AMD trends upward

By Stephanie N. Rotondo

Seattle, Oct. 24 – The convertible bond market was again being dominated by Peabody Energy Corp.’s 4.75% convertible junior subordinated debentures due 2066 on Monday.

A trader said the paper was “still moving” in early afternoon trading, placing the issue in a 23.5 to 24 context.

He called that 2 points better outright.

The paper traded in a range of 20 to 21 for most of the day Friday, hitting a high of 21.5.

Another market source saw the convertibles at 24.5, a gain of 3 points on the day.

The name has been on a tear of late, as coal prices have helped the overall sector – as well as investor sentiment – improve. A trader said that the convertible issue was likely not accurately priced. Though there are so many factors to consider, making such an assessment is not without difficulty.

“The possibilities are too infinite to make a sound decision at this point,” he said, noting that the company’s bankruptcy case, as well as the looming election, will factor heavily.

It was also reported Monday that Mangrove Partners Fund had taken a 5.2% equity stake in the bankrupt coal producer. The fund deemed the name “undervalued.”

As for the stock, it more than doubled its price during the session, rising $5.48, or 51.75%, to $16.07. Last week alone, the equity price tripled.

Away from Peabody, Advanced Micro Devices Inc. was trading a bit. The name became notable on Thursday when the chip maker posted a second consecutive gain in revenue.

The streak was notable, given that AMD has seen four straight years of losses.

The 2.125% convertible notes due 2026 were trading at 107.75 at mid-morning, which compared to opening levels just south of 106.

Later in the day, the issue was pegged at $107.34 versus a share price of $6.75.

The equity was up 49 cents, or 7.44%, at $7.01.

For the quarter, AMD reported a third-quarter loss of $406 million, or 50 cents per share. The loss was due in large part to a $340 million charge taken in relations to contract changes with the company that manufactures AMD’s products.

Excluding that charge, AMD would have posted a profit of 3 cents per share.

Revenue meantime jumped 23% to $1.31 billion, which was above the company’s previously stated expectations.

Analysts polled by Thomson Reuters had forecast break even EPS on $1.21 billion in revenue.

But while the numbers were not horrible, the company did note that custom chip sales – a large part of revenue – typically rose in the third quarter, ahead of the holiday season when consumers buy new game consoles. Therefore, revenue in the fourth quarter is expected to decline by 15% to 21% from the third quarter.

Analysts are anticipating a 13% decline.

Mentioned in this article:

Advanced Micro Devices Inc. Nasdaq: AMD

Peabody Energy Corp. OTCBB: BTUUQ

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