Convertibles better in light volume; some energy names miss rally

By Rebecca Melvin

New York, March 17 – U.S. convertibles were generally better bid but volumes remained low on Thursday, as an ongoing rebound in oil prices helped some but not all energy names post gains.

“I’m not noticing a meaningful change in some of these busted energy names like Cobalt International Energy Inc., Whiting Petroleum Corp. and Cheniere Energy Inc.,” a New York-based trader said.

A busted convertible is one that is trading well below its conversion value and acts more like a straight bond than a hybrid security because the so-called stock option is broken, or busted.

Cobalt’s 3.125% convertibles due 2024 were quiet in the early going Thursday, but eventually tacked on a point to close at 44.75, against shares of the Houston-based energy exploration and production company that gained 19 cents, or 6%, to $3.40.

But Chesapeake Energy Corp. has been an exception to the trend in energy names and has regained significant ground since its lows in the depths of February. The Chesapeake 2.5% convertibles due 2037 jumped to as high as 72.75 on Thursday, which was up from 68 to 71 on Wednesday. Shares of the Oklahoma City-based natural gas company gained another 40 cents, or 9%, to $4.79. Two weeks ago, the price of the Chesapeake $2.5% convertibles was 53.75.

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