Morning Commentary: Convertible market trades heavy with broader markets; oil names in decline

By Stephanie N. Rotondo

Phoenix, Sept. 28 – The convertible debt market was trending lower in early Monday trading, following the broader markets downward as global economic concerns grew.

As for domestic worries, the market continued to ponder when – or if – the Federal Reserve would raise interest rates, as the central bank chose to hold rates steady earlier in the month.

On top of that, a government shutdown was looming as congressional leaders fought over the next fiscal year’s budget.

In the world of convertible preferred stock, oil and gas names were struggling as oil prices remained in flux. Domestic crude prices were off 1.58% at mid-morning.

Given the volatile oil market, many companies have been struggling to stay afloat. As such, several have gone into preservation mode.

SandRidge Energy Inc. joined those ranks Monday, as the Oklahoma City-based company said it was suspending its dividend on the 7% convertible perpetual preferreds (OTCBB: SDRXN).

Those preferreds traded down $1.15, or 14.11%, to $7.00.

New Source Energy Partners LP meantime announced that it was skipping its Oct. 15 dividend payment on its 11% series A cumulative convertible preferred units (NYSE: NSLPPA). The units declined $4.20, or 70.69%, to $1.60.

New Source – also based in Oklahoma City – said the decision was due to a possible borrowing base deficit under a revolving credit facility. The company is working with lenders to deal with the issue and restart its dividend payments.

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