Convertibles quiet; Arconic, RPM International trade; Aegean Marine recovery in focus

By Abigail W. Adams

Portland, Me., July 5 – Trading volume remained light in the convertibles space in the return from the July 4 holiday with about $24 million on the tape early in Thursday’s session and volume barely breaking $100 million by late afternoon, sources said.

“It’s going to be even worse tomorrow,” a market source said.

However, the calendar for new deals is expected to heat up in the July 9 week with the convertibles space jumping back into action, a source said.

RPM International Inc.’s 2.25% convertible notes due 2020 were among the most active of the day with about $8 million of the bonds on the tape by late afternoon.

The notes trade like common equity and were moving alongside stock, a market source said.

While active in the morning, trading of Arconic Inc.’s 1.625% convertible notes due 2019 fizzled in the afternoon.

The notes were under some outright pressure; however, trading volume was extremely light, a market source said.

Aegean Marine Petroleum Network Inc.’s convertible bonds did not trade on Thursday.

However, the notes were quoted up 30 to 40 points and are expected to make a recovery after the company announced a memorandum of understanding with Mercuria Energy Group Ltd. for a $1 billion plus refinancing package.

RPM active

RPM’s 2.25% convertible notes due 2020 were among the most active of the day with about $8 million of the bonds on the tape by late afternoon, a market source said.

The 2.25% notes were seen trading at 121.5 with stock down 20 cents to 30 cents early in the session.

RPM’s convertibles trade like common equity and were moving alongside the stock, a market source said. “It was probably a swap trade,” the source said.

While down early in the session, RPM stock recovered later in the afternoon and closed the day at $59.70, an increase of 0.86%.

The Medina, Ohio-based specialty coatings, sealants and building materials company announced a quarterly dividend of 32 cents per share on Thursday payable on July 31 to stockholders of record as of July 17, according to a company news release.

Arconic trades

While active early in the session, Arconic’s 1.625% convertible notes due 2019 were not seen trading later in the afternoon.

However, with about $2 million of the bonds on the tape, they were still one of Thursday’s volume movers, a market source said.

The notes were seen trading at 100.375 with stock up more than 3% early in the session. Arconic stock closed Thursday at $17.07, an increase of 1.01%.

There was some outright pressure on the notes, which were quoted at 100.25 bid, 100.5 offered on Thursday, a market source said. However, trading volume was light.

The Pittsburgh-based aluminum manufacturer’s convertible notes were also active in the latter part of June as the company works to bring a smelting operation in Indiana back on line to increase domestic aluminum production capacity.

The 1.625% notes dropped more than 4 points outright at the end of April after the company lowered its forward guidance due to the rising cost of aluminum.

Aegean Marine recovery eyed

Aegean Marine’s 4% convertible notes due 2018 and 4.25% convertible notes due 2021 were not seen on the tape on Thursday as the company’s stock skyrocketed more than 200%.

However, the notes were quoted 30 to 40 points higher and are expected to return to their previous levels before the notes bottomed out in early June.

Aegean Marine’s 4% convertible notes were seen at 80 bid, 90 offered on Thursday, although they did not trade, a market source said.

The 4% notes last traded on June 28 at 54.5, according to Trace data.

The 4.25% convertible notes were quoted at 60 offered, a market source said. They last traded on June 28 at 35.

Aegean stock skyrocketed on Thursday after the company announced it had reached a memorandum of understanding with Mercuria Energy Group.

Stock closed Thursday at $2.03, an increase of 222.22%.

Mercuria plans to provide a $1 billion trade finance facility to support Aegean’s revolving credit facilities and $30 million in liquidity, according to a company news release.

Aegean will issue new shares equal to 30% of its common stock to Mercuria and invite a Mercuria representative to join its boards.

“This wasn’t done on a whim,” a market source said of Mercuria’s investment. “They’ve obviously seen enough to be satisfied that the investment is good.”

Aegean’s stock and convertible bonds tanked in early June after the company announced accounting errors in its 2017 year-end report.

The soon-to-mature 4% notes were previously trading around 95 and the 4.25% notes were trading around 70 before the announcement.

With Mercuria’s investment, the prospects of Aegean covering the 4% notes looks good, the source said.

The 4% notes, which mature on Nov. 1, are expected to return to the 95 level.

Mentioned in this article:

Aegean Marine Petroleum Network Inc. NYSE: ANW

Alcoa Corp. NYSE: ARNC

RPM International Inc. NYSE: RPM

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