Convertible bond go-gos like Priceline, Tesla trade; Chesapeake up, but down from day’s highs

By Stephanie N. Rotondo

Seattle, April 12 – Trading in the convertible bond market remained subdued on Wednesday, in part because of holidays that were keeping people out of the office and in part because the market was prepping for Thursday’s kick-off to bank earnings season.

Of the day’s dealings, Priceline Group Inc.’s 0.9% convertible notes due 2021 continued to see some action, despite any fresh news to act as a catalyst.

At the end of the day, the 0.9% bonds had drifted down to 11.875 bid, 112 offered, a market source reported. That compared to a 112 to 112.5 context on Tuesday.

In early trading, the convertibles were off a shade at 112.15, according to another market source.

The weakness in the convertible notes coincided with an over 1% decline in the underlying equity.

Meanwhile, Tesla Inc.’s 1.25% convertible notes due 2021 were initially inching upward as it was reported the company was looking to add new members to its board of directors.

However, the bonds finished the session slightly weaker, as did the 2.375% convertible notes due 2022.

The company reportedly wants to make the board changes in order to respond to critics who say that current board is too close to Elon Musk, chief executive officer and founder of the Palo Alto, Calif.-based car manufacturer.

A source saw the 1.25% convertible notes hitting highs near 102.5 in midweek trading, though they ended about a point softer at 100.75 bid, 101.25 offered.

At mid-morning, the 1.25% convertibles were pegged near 102.5 against a stock price of $307.56.

As for the 2.375% convertibles, they closed at 108.25, which compared to opening levels around 110.5.

The stock meantime lost nearly 4% for the day, falling back under the $300 mark.

Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 were also on the move.

A source said the paper traded as high as 107.5 but eventually finished the day closer to 106. That was up only slightly from the previous day.

As for the company’s shares, they were up nearly 2% in early trading, as management prepared to present at the Goldman Sachs Houston Credit Investor Conference on Wednesday. But once the Energy Information Administration issued its weekly report – which showed that inventory at the Cushing, Okla., hub had risen 276,000 – the stock started to drift lower. It closed down less than 0.5% at $6.16.

For its part, West Texas Intermediate crude prices fell nearly 1% after the report.

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