Convertibles quiet but firm on stock rally; Chesapeake, Weatherford gain; Spirit Realty busy

By Stephanie N. Rotondo

Seattle, Nov. 7 – While the equity markets were taking off in active trading on Monday, the convertible bond market was not following suit.

“Nobody’s chasing anything in our market,” a trader said. “There are no outright buyers in anything.”

The stock markets were pushing up in the wake of an announcement that the FBI was not considering any criminal charges against Democratic presidential nominee Hillary Clinton in regards to e-mails from her private server.

On Oct. 28, the FBI said it was reopening the investigation, as new e-mails had surfaced. That sent shockwaves through the market, as it placed more uncertainty on the upcoming presidential election. With the news that the agency was not moving forward with charges, a little more certainty was getting priced in.

And while volume in the convertibles market continued to be subdued, there were signs that it was firming with its equity counterparts.

A gain in domestic crude oil prices, for instance, helped push up energy names like Chesapeake Energy Corp. and Weatherford International plc.

For its part, Chesapeake has been viewed a little more positively since the company reported earnings last week. The results indicated that the company’s turnaround efforts during a time of depressed oil prices were starting to have an impact.

The Oklahoma City-based oil and gas producer’s 5.5% convertible notes due 2026 ended at 92.5 bid, 93 offered, according to a market source. That compared to 90.5 at the open, which was unchanged from Friday.

The equity underlying the debt improved 16 cents, or 3.02%, to $5.45.

As for Weatherford, its 5.875% exchangeable notes due 2021 traded up 1 to 2 points outright, moving with a 95 handle. The stock ended up 6 cents, or 1.56%, at $3.91.

Investors have also been eyeing the Houston-based oil services provider of late. Specifically, concerns about a potential covenant breach have weighed on the name.

The company recently confirmed that it was in compliance, but investors appear to still have reservations.

As for oil prices, they gained over 2% on the day to trade above the $45-a-barrel threshold. The gains were also helped by the FBI announcement.

Spirit Realty active

Spirit Realty Capital Inc. was inching upward on Monday.

A trader said the 2.875% convertible notes due 2019 were up at 104.625 bid, 104.8125 offered. That compared to 104.625 against a stock price of $11.42 prior to the market’s open.

Another market source saw the issue trading between 104.625 and 104.875 for most of the day, though it was noted that some trades occurred with a 105 handle.

The stock improved a dime to $11.52.

On Thursday, the Dallas-based real estate investment trust reported third-quarter results that came in just below expectations.

Net income was $27.4 million, or 6 cents per share. That was an 82.6% increase year over year. Rental revenue improved 1.6% to $161.8 million.

On average, analysts were expecting EPS of 8 cents on revenue of $166.73 million.

Funds from operations declined to 19 cents a share from 21 cents a share the year before. Adjusted funds from operations, however, gained 12%, posted at $108.4 million, or 22 cents per share.

On an adjusted basis, the adjusted funds from operations earnings per share was unchanged from the previous year.

Oracle gets NetSuite

NetSuite Inc. was officially acquired by Oracle Corp. on Monday, sending the NetSuite convertibles up 4 to 5 points outright.

A market source saw the 0.25% convertible notes due 2018 in a 109 to 110 context.

Ahead of the market’s open, NetSuite’s equity was at $109.01, up from $90.34 on Friday.

Oracle said in a statement early Saturday that it had secured enough NetSuite shares in a tender offer to move forward with the $9.3 billion acquisition, which was first announced in July.

The purchase price amounted to $109.00 a share.

In late October, rumors were circulating that Oracle might up its bid for the San Mateo, Calif.-based cloud computing company. Up until then, NetSuite investors, including T. Rowe Price, had expressed concerns about the offer, citing the fact that top brass had ties to Oracle’s Larry Ellison.

Zach Nelson, NetSuite’s chief executive officer, and Evan Goldberg, chief technology officer, previously worked for Ellison.

But chatter of an increased offer were dashed when Mark Hurd, co-chief executive officer of Oracle, told CNBC that the bid was the “best and final offer.”

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

NetSuite Inc. NYSE: N

Spirit Realty Capital Inc. NYSE: SRC

Weatherford International plc NYSE: WFT

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