Convertibles weaker; Cobalt ‘comes in’ on hedge after earnings miss; Endeavour lower

By Rebecca Melvin

New York, Aug. 5 – U.S. convertibles were under pressure Tuesday and traded mostly lower in tandem with weakness in the broader markets, including lower equities, slightly wider credit markets, and generally light volumes as vacation season remained underway.

“When there’s lighter liquidity, it doesn’t take much to make things weaker,” a New York-based trader said.

Qihoo 360 Technology Co. Ltd.’s two new convertibles, as well as the older Qihoo convertibles, were down slightly in continuing active trade since the $450 million of newer, dual tranches debuted in the market on Friday. The complex was called down by about 0.375 point to 0.5 point on a hedged basis, a New York-based trader said.

Cobalt International Energy Inc.’s two convertible issues were lower outright and “came in” on a dollar-neutral, or hedged, basis after the Houston-based oil exploration and production company reported a bigger-than-expected quarterly loss and disclosed it received a Wells notice from the Securities and Exchange Commission on Monday. Cobalt shares fell 11%.

Endeavour International Corp. saw its 5.5% convertibles due 2016 quoted at 41 bid, 45 offered as shares of the Houston-based oil and gas exploration and production company fell about 12% after the company posted a wider adjusted net loss for its quarter but said that physical production exceeded revised guidance. The Endeavour bonds had recently been at about 50.

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