Chesapeake in focus as Icahn ups stake; Kodak rises; Clearwire wavers; Ultrapetrol on tap

By Rebecca Melvin

New York, Dec. 20 - Chesapeake Energy Corp. traded up in the convertible bond market Monday as shares of the Oklahoma City-based natural gas company jumped on word that billionaire investor Carl Icahn has raised his stake in the company to 5.8% with the purchase of 38.6 million additional shares of stock.

Eastman Kodak Co. was also in trade as its underlying shares continued to run up, notching their fifth straight day of gains and up by about 45% since the Rochester, N.Y.-based digital imaging company posted strong earnings at the end of October.

The Eastman 7% convertibles due 2017 traded at 108 versus a share price of $5.85.

Clearwire Corp.'s convertibles were lower in line with their underlying shares, trading at 100.75 versus a share price of $5.10.

Trading volume was light and pricing was mixed, sources said, as the financial markets have begun to quiet ahead of the Christmas holiday.

"All these guys have locked in; they aren't going to be doing much of anything this week," a New York-based sellside trader said.

In the primary market, a small deal launched despite the generally hushed environment.

Ultrapetrol (Bahamas) Ltd. plans to price $60 million of seven-year convertible senior notes that were talked to yield 7% to 7.5% with an initial conversion premium of 17.5% to 22.5%.

According to a market source, about $50 million had been placed by midday, but it wasn't known exactly when the offering was pricing.

Chesapeake up on Icahn stake

Chesapeake's 2.75% convertible notes due 2035 traded at 96.75 versus a share price of $25.00, according to a New York-based sellside desk analyst. According to Trace data, the paper traded at 97 late in the day, which was up 4.6 points.

Chesapeake's 2.5% convertibles due 2037 traded at 88 versus a share price of $25.00. That paper was up 2.4 points on the day, according to Trace data.

Chesapeake's 2.25% convertibles due 2038 traded at 76, which was up 0.75 point on the day.

According to a Securities and Exchange Commission filing, Icahn paid $945.9 million for the 38.6 million shares he purchased. The activist investor believes the shares are undervalued and he and the company's management have had talks about the business and how to maximize shareholder value.

Shares of the oil and natural gas producer rose $2.06, or 8.8%, to $25.36 in heavy volume. But for the year to date, the shares are down 10%.

Icahn began buying Chesapeake stock during the first quarter of 2010.

Whether the bonds were strengthening on the news wasn't clear. "I don't know, his track record isn't all that good," a New York-based sellside analyst said about whether Icahn's involvement was ultimately positive for the company.

Ultrapetrol quiet

Ultrapetrol, a Nassau, Bahamas-based shipping company operating primarily in South America and offering platform supply vessels to the offshore oil sector, planned to price $60 million of seven-year convertible senior notes.

Stock borrow on the company was said to be poor, which would discourage hedged players' involvement in the deal.

In addition the deal was said to be too small to garner much attention from market players that would typically work out a valuation for the deal.

"...only outrights will care," a Connecticut-based sellside analyst said.

The coupon was talked at 7% to 7.5% with an initial conversion premium of 17.5% to 22.5%.

There is an over-allotment option for up to an additional $10 million of notes.

Proceeds will be used to expand its platform supply vessel operations in Brazil, including potential construction or acquisition of additional vessels; to support the development of its river container trade, including potential acquisitions or the construction of additional vessels; to accelerate the construction of additional new river barges in its shipyard; and for general corporate purposes.

Jefferies and Credit Suisse are the bookrunners.

The notes will be non-callable for four years and then provisionally callable subject to a 130% price hurdle over conversion.

There is a conversion price reset feature after one year based on a 20-day volume weighted average price. The notes have takeover protection.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Clearwire Corp. Nasdaq: CLWR

Eastman Kodak Co. NYSE: EK

Ultrapetrol (Bahamas) Ltd. Nasdaq: ULTR

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.