Convertibles firm; Alcoa better ahead of earnings; Allergan in line; Chesapeake trades up

By Rebecca Melvin

New York, April 11 – Convertibles were quiet on Monday. Trading levels were flat to higher amid a lack of issuance that has contributed to tight supply in the space and thereby a firm secondary market, a New York-based trader said.

Among bonds, volumes were light, and there was more action in the convertible preferreds, the trader said.

Alcoa Inc.’s 5.375% mandatory convertible preferreds due 2017 were active and higher by about 0.375 point on a dollar-neutral, or swap, basis ahead of the aluminum producer’s first-quarter earnings released after the market close and unofficially kicking off the new earnings season.

The Alcoa earnings came in below estimates and shares fell in after-hours action, but the New York-based aluminum producer is still on track to spin off its faster-growing aerospace and auto business segments later this year into a separate company.

Allergan plc’s convertible preferred remained active and were in line, or flat, in trading action, a trader said. The Allergan preferreds have been active since the company’s tie up with Pfizer Inc. was spiked last week following new U.S. regulations that discourage mergers related to corporate tax inversions.

Among bonds, Chesapeake Energy Corp.’s convertibles were trading better on Monday after the Oklahoma City-based natural gas company announced that it has amended its $4 billion revolving credit facility agreement, granting relief of some debt covenants and allowing the company to continue to borrow at unchanged levels.

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