Morning Commentary: Focus shifts to new year; Cobalt up again; Seacor holders don’t wait on put

By Abigail W. Adams

Portland, Me., Dec. 21 – The convertibles market was quiet early Thursday with attention turning towards the new year and what it will mean for new issuance.

The primary market is looking to tax changes to spur corporate offerings of convertible securities. And the secondary market is looking to the primary market to bring new deals to increase liquidity.

Whether the reduction in the corporate tax rate and cap on the deductibility of interest paid on corporate debt will be the catalyst for convertible securities that some are hoping for remains to be seen.

Meanwhile Cobalt International Energy Inc.’s 2.625% convertible notes due 2019 and 3.125% convertible notes due 2024 remained in focus after a $500 million settlement for the bankrupt company’s Angola interests was announced Wednesday.

The long busted convertible notes from the Houston-based petroleum and natural gas exploration company both rose 20 points to trade in the 30s during Wednesday’s session before solidifying in the 25 range.

The notes continued to actively change hands Thursday. The 3.125% notes were trading in the 23 to 26 range and the 2.625% notes in the 24.25 to 26 range in early trades, according to Trace data.

Holders of the notes are now looking towards the amount Cobalt’s Gulf of Mexico property is worth to determine what they will receive from the bankruptcy, a market source said.

Despite Seacor Holdings Inc.’s amendment to the terms of their 2.5% convertible notes due 2027, which added an additional put option in 2018, holders of the notes redeemed $31 million on Dec. 19. The 2.5% notes now $64.45 million outstanding.

The Fort Lauderdale, Fla.-based offshore oil, gas, and marine equipment company amended the terms of their 2.5% notes on Dec. 13 to add an additional put option on May 31, 2018.

“It cost them money to do that,” a market source said. “There was something in it for them.”

The extra put option may have been added with the hope holders would wait to redeem the notes, according to a market source. The notes were settled in cash, according to a Securities and Exchange Commission filing.

The 2.5% notes have largely traded at par for the past year. The company’s 3% convertible notes due 2028 traded in the 93 to 95 range for most of December, according to Trace data.

Seacor stock was up in early trading Thursday to $48.65, an increase of 0.56%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.