SunEdison free fall continues; slide in oil prices weighs on energy names; Accuray surges

By Rebecca Melvin

New York, Aug. 21 – U.S. convertibles remained heavy on Friday with some of the names that have seen the greatest magnitude of losses in recent sessions continuing to move lower as shares plunged in a worsening rout.

Heaviness continued in convertibles “as global risk-off sentiment pervades,” a New York-based trader said.

In addition, oil prices continued to tumble, amounting to a “double bogey” for the session, a New York-based trader said, referring to a score of two over par on an individual hole of a golf course.

The slide was on thin trading volume however as market players eye the upcoming Labor Day holiday as a signal for normal trading action to resume following the summer slowdown, a trader said.

The convertibles in the SunEdison Inc. complex moved lower again. The SunEdison 2.625% convertible was quoted at 64 bid, 64.5 offered intraday when shares were around $11.00. But the shares actually closed lower at $10.72, or down 11%, which was on top of a loss of 17% over Wednesday and Thursday.

Oil prices fell on Friday, and selling reignited among some energy sector equities.

The price of West Texas intermediate crude oil for October delivery was down $1.08, or 2.6%, to $40.24 per barrel.

Emerald Oil Inc. common shares were down 10%; Energy XXI Ltd. shares were down 7%; and Chesapeake Energy Corp. dropped 4%.

Most energy convertibles were quiet on Friday, a Connecticut-based trader said.

But Whiting Petroleum Corp., one of the more liquid names in the sector, was down another point on a swap basis, a New York-based trader said.

And Accuray Inc. saw a 13% surge in its common stock after reporting a jump in its 21st Century oncology orders, and its 3.5% convertibles were indicated higher to 133 from 122 previously.

On Thursday, the S&P 500 stock index fell 2%, and into negative territory for the year, or down about 1% year to date, and on Friday it plunged another 3%, or 64.84 points to 1,970.89. The Dow Jones industrial average fell 530.94 points, or 3%, to 16,459.75 on Friday; and the Nasdaq Composite stock index tanked 3.5%, or 171.45 points, to 4,706.04.

SunEdison shares slide again

The SunEdison 2.625% convertibles, one of two, $450 million tranches that priced in May, were quoted at 64 bid, 64.5 offered with the underlying shares at $11 and change. That was down from 70 to 71 on Tuesday when the common shares closed at $14.50.

On Wednesday, the SunEdison bonds were significantly weaker, with the newest issues down in excess of 2 points on the day.

Also on Friday, the SunEdison 2.75% convertibles printed at 100.99, which was down from 106 on Thursday and 114 on Wednesday, according to Trace data.

The SunEdison 2% convertibles due 2021 were down to 102 from 109.

Shares of the St. Peters, Mo.-based solar technology company fell another $1.38, or 11%, to $10.72. The move was on top of a 10% drop on Thursday and a 7% fall on Wednesday.

SunEdison was the only issuer in the convertibles primary market this past week, and its deal came fast on the heels of its last tap of the market in May when it priced a dual-tranche offering of convertible bonds for $900 million. It also tapped the convertibles market in January for $400 million of convertible notes.

Whiting drops a point on swap

Whiting’s 1.25% convertibles due 2020 traded at 79.5 on Friday, which was called down a point on a swap basis. That was against a share price that was down $1.20, or 7%, at $15.84 at the end of the day and compares to its Aug. 10 market of 85.25 bid, 85.75 offered versus an underlying share price of $19.00.

Whiting shares have tumbled with crude oil prices, which have fallen for eight straight weeks.

On Friday the Caixin/Markit Manufacturing Purchasing Managers’ index, or China PMI, showed a drop to 47.1 in August, which marked a 6.5-year low and compared to July’s reading of 47.8.

Slowing economic activity in China, which has been a major part of the equation for growing global oil demand in recent years, exacerbates an oversupply problem in the global oil markets presently.

Mentioned in this article:

Accuray Inc. Nasdaq: ARAY

Chesapeake Energy Corp. NYSE: CHK

Emerald Oil Inc. NYSE: EOX

Energy XXI Ltd. Nasdaq: EXXI

Goodrich Petroleum Corp. NYSE: GDP

SunEdison Inc. Nasdaq: SUNE

Whiting Petroleum Corp. NYSE: WLL

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