Morning Commentary: Rexnord trades off in wake of Trump Tweets; Chesapeake rises on asset sale news

By Stephanie N. Rotondo

Seattle, Dec. 5 – The convertible bond market was a little more muted than it was in the previous week, a trader said on Monday.

For instance, he saw little follow-through in Rexnord Corp.’s $350 million of 5.75% series A mandatory convertible preferreds, a deal that priced Friday with a 20% initial conversion premium.

The trader saw the issue – which had traded up above the $50-par mark upon pricing – in a $49.80 to $49.90 context in early dealings.

The trader noted that the common stock (NYSE: RXN) had also come in.

The equity was down 19 cents at $20.08 at mid-morning.

The trader said that at those levels, the bonds were trading around an 80% delta, “which is generally correct for small premium estimates like this.”

The weakness in the stock was attributed to Tweets made by president-elect Donald Trump on Friday, in which Trump called out the company for its plans to move an Indiana production plant to Mexico.

Meanwhile, Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 were moving up on news the company was selling part of its Haynesville Shale area property for $450 million.

The convertibles were trading in a 112 to 112.5 context, according to a trader.

The equity (NYSE: CHK) was firming on the news as well, adding nearly 5% in early trading.

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