Energy names dip; Southwestern Energy slumps; Cobalt contracts; Trinity Industries expands

By Rebecca Melvin

New York, Feb. 19 – U.S. convertible energy names ended on a down beat on Friday after ticking up earlier in the holiday-shortened week along with a rebound in some beaten-down equities.

U.S. financial markets were closed on Monday in observance of Presidents Day.

Southwestern Energy Co.’s convertibles were notably weaker but slightly outperformed the underlying common shares after a rating downgrade by Moody’s Investors Service to junk from lower medium-grade credit.

The Moody’s rating action included 10 energy exploration and production companies. Moody’s said Southwestern’s downgrade reflected its low capital efficiency tied to natural gas prices, elevated leverage metrics, and reserve concentration risk in the Fayetteville and Marcellus Shales.

Cobalt International Energy Inc.’s convertible bonds also fell with lower shares. The convertible bonds contracted about a point on a dollar-neutral, or swap, basis, a New York-based trader said. The Cobalt convertibles were notable in that they missed out on a rebound that other energy names enjoyed earlier in the week, the trader noted.

“They didn’t move up earlier in the week,” he said.

Shares of the Houston-based oil-focused exploration and production company fell 14% to $2.10 on Friday.

Trinity Industries Inc. fell on an outright basis, but the convertibles of the Dallas-based maker of rail cars expanded on a dollar-neutral basis by a point.

Trinity’s 3.875% convertibles due 2036 were quoted at 102.5 against its common shares at $16.00.

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