Peabody convertibles pop yet again in active trading; Stone Energy inks RSA; market muted

By Stephanie N. Rotondo

Seattle, Oct. 21 – A convertible bond trader said Peabody Energy Corp. was “basically the big name” in Friday trading, as the bankrupt coal producer’s debt continued to gain momentum.

The trader said the 4.75% convertible junior subordinated debentures due 2066 were trading with “mostly 20 handle prints.”

“They keep going higher and higher every day,” he said.

The paper traded even higher by day’s end, hitting 21.5, according to another trader.

Paper was trading near 14 as of Thursday’s close.

As for the stock, it jumped $4.32, or 68.9%, to $10.59.

That is about triple what it was at the start of the week.

The name has been gaining traction for the last few weeks, helped in large part by increasing coal prices. Coking coal in Australia, for instance, is up nearly 2.5x at $230 a metric ton.

Elsewhere in the distressed energy space, Stone Energy Corp. said it had inked a restructuring support agreement with holders of its 1.75% convertible notes due 2017 and its 7.5% senior notes due 2022. The RSA will eventually put the Lafayette, La.-based oil and gas producer into bankruptcy.

The holders own about 85.4% of the outstanding debt. That will leave very little for the market to play with, a trader said.

“Two guys own most of these two issues,” the trader said. He opined that there were about $20 million to $22 million of the convertibles that were “unspoken for” under the RSA.

“That makes everything a little more difficult to trade,” he noted, seeing little to no activity in the name.

“Stone hasn’t really traded in months, but now that the plan is out, I hope it starts trading,” said another trader.

He noted that the convertibles were last seen in the high-50s.

The stock, however, plunged over 42% in early trading to $4.08. It did stage a small rally, ending down $3.39, or 34.98%, at $6.30.

Overall, liquidity remained thin, with one trader attributing the lack of volume to it being a Friday.

“I really think people are just waiting for the election,” he added.

Mentioned in this article:

Peabody Energy Corp. OTCBB: BTUUQ

Stone Energy Corp. NYSE: SGY

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