Convertible bonds slip with market; SunEdison down; Chesapeake retreats on amendment news

By Stephanie N. Rotondo

Phoenix, Oct. 1 – The convertible bond market was weakening in Thursday trading, initially following the Dow Jones industrial average lower before the equity markets rebounded in the afternoon.

“The Dow just dropped 100 points, real fast,” a trader said early in the session, adding that the drop was because the market was “worried about Syria blowing up.”

“Like it hasn’t already,” he noted.

Russia began an airstrike campaign against those fighting against the nation’s president, Bashar al-Assad. However, fears of escalation subsided after Russia foreign minister Sergei Lavrov said the Syrian rebels were not considered a terrorist group and should be included in discussions on how to handle the nation’s political problems.

Following those comments, the broader market did manage to pare its losses, though things remained generally softer.

But as for the convertibles space, SunEdison Inc. continued to be widely traded, even amid muted volume, according to a trader.

“I see more of the paper getting quoted with a 50 handle,” he said. “The stock was higher, now it’s down a little bit.”

There hasn’t been any fresh news out on the solar energy company, but the name has been dragged down of late as investors worry about the company’s high debt.

Meanwhile, Chesapeake Energy Corp. said in a regulatory filing that it had secured an amendment on its senior revolving credit line that would, among other things, allow for the issuance of up to $2 billion in junior debt. The news was pushing “all the corporates” down, according to a trader.

He said there were “a bunch of sales” in the 2.5% convertible notes due 2037 at 85.25, which compared to levels with an 87 handle on Tuesday.

A second market source placed the issue in an 85 to 86 context, down from 87 to 88 previously.

The equity closed down 12 cents, or 1.64%, at $7.21. It was down nearly 4% at mid-morning.

SunEdison’s dive continues

SunEdison’s convertibles continued to be active and weaker, a trend that has been going on all week.

However, there hasn’t been any fresh news out on the company to act as a catalyst. But there has been chatter that investors are concerned about the company’s high leverage.

The 0.25% convertible notes due 2020 remained the most active of the structure, falling almost 4 points to 51.875, according to one market source. The 3.375% convertible notes due 2025 were also busy, falling about 1.5 points to trade sub-50.

The 2.375% convertible notes due 2022 meantime fell the most, losing nearly 4.5 points to close around 52.125.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

SunEdison Inc. NYSE: SUNE

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