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Morning Commentary: Chesapeake’s recent issue trades up with oil; Twitter bonds steady as bids eyed
By Stephanie N. Rotondo
Seattle, Oct. 5 – Convertible bond market players were focusing on Chesapeake Energy Corp.’s $1.1 billion of 5.5% convertible senior notes due 2026, a trader reported early Wednesday.
“That’s the only thing trading,” the trader said, seeing about $23 million of the paper moving by mid-morning.
He noted that the issue was trading all over the place, starting with a 103 handle, slipping to “102 and change,” and then pushing up to 104.5.
“The stock is up 40 cents,” the trader noted. “That’s a lot, considering where they strike.”
The convertible bond issue priced Sept. 30 with a 40% conversion premium, or a conversion price of $8.57 a share.
The equity (NYSE: CHK) was trading at $6.79 at mid-morning, up 43 cents, or 6.67%.
The trader opined that the gains were due to the rising price of oil, which was trading at or near $50 after the U.S. Energy Information Administration reported the fifth consecutive weekly drawdown of crude inventories.
The agency said stockpiles fell by 3 million barrels last week. The American Petroleum Institute said on Tuesday that it expected a draw of 7.6 million barrels, though analysts polled by Reuters had predicted a build of 2.6 million barrels.
Twitter Inc.’s 1% convertible notes due 2021 were meantime little changed on reports the social media company could receive takeover bids this week.
The news was reported late Tuesday by The Wall Street Journal. The article noted that Salesforce, Google and Disney could be among the bidding group.
The convertibles were pegged in a 95 to 95.5 context in early midweek trading. The stock (NYSE: TWTR) was up $1.05, or 4.46%, at $24.57.
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