Aegean Marine improves on restructuring agreement; Ensco drops; Microchip active

By Abigail W. Adams

Portland, Me., Dec. 18 – The convertibles secondary space opened Tuesday with an uptick in trading volume as equity markets showed signs of firming with the Dow Jones industrial average up 200 points at Tuesday’s open.

However, activity petered off into the afternoon as the market gave back some of its early gains to close the day up 83 points.

While markets were firmer, holders were still selling into bids, a market source said.

Aegean Marine Petroleum Network Inc.’s 4% convertible notes, which matured on Nov. 1, were among the most actively traded issues in the secondary space with the notes making gains after the petroleum company requested bankruptcy court approval for a new restructuring agreement.

Meanwhile, Microchip Technology Inc.’s 1.625% convertible notes due 2027 were improved on an outright basis as stock gained on Tuesday while the notes still remained below par.

Ensco plc’s 3% convertible notes due 2024 dropped alongside the broader energy sector as crude oil futures plummeted on Tuesday.

Illumina Inc.’s 0% convertible notes due 2023 contracted on Tuesday with a large seller for the notes in the market.

Aegean’s restructuring

Aegean’s 4% convertible notes due Nov. 1, 2018 rose 1 to 2 points on Tuesday as investors responded favorably to a new restructuring agreement.

The notes opened the day as high as 23.5 before settling around 22.5 early in the session, a market source said. The notes continued to trade in the 22.5 to 23.5 range for the duration of the afternoon.

The notes were previously in the 9 to 10 range at the start of December but have slowly recouped their losses.

While less active, Aegean’s 4.25% convertible notes due 2021 were also trading in the 22.5 to 23.5 range.

Aegean filed for Chapter 11 bankruptcy after defaulting on the 4% notes.

Creditors initially objected to the bid procedure proposed by the company, which, creditors claimed, would have facilitated the sale of virtually all of the company’s assets to Mercuria Asset Holdings (Hong Kong) Ltd., Prospect News reported.

Aegean requested court approval of a restructuring support agreement for an alternative proposal developed by Oaktree Capital Management LP and Hartree Partners LP on Monday.

Investors were giving credence to the proposal, a market source said.

Microchip below par

Microchip Technology’s 1.625% convertible notes due 2027 were up about 1 point outright as stock improved on Tuesday.

The notes traded up to 99 with stock up about 3.5% early in Tuesday’s session, according to a market source.

Microchip stock traded as high as $74.09 on Tuesday but came in to close the day at $72.14, an increase of 1.31%.

The notes have seen huge movement over the past year with the notes trading as high as 134 in June and dropping to spend much of October and November below par, according to Trace data.

Typically, those movements are the type hedge players make a lot of money from, and Microchip’s convertible notes were initially performing well to the downside.

However, the returns were negated by the blowout in credit spreads, a market source said.

Ensco under pressure

Ensco’s 3% convertible notes due 2024 were under pressure in active trading on Tuesday as the brutal sell-off in crude oil futures accelerated.

The 3% convertible notes dropped more than 5 points outright to trade down to 67.5. Ensco stock closed Monday at $3.77, a decrease of 4.31%.

The offshore drilling contractor’s convertible notes and equity were dropping alongside the broader energy sector as crude oil futures slid more than 7% to settle around $46.

Prior to Tuesday, there has only been one other day in the past 28 years where every oil and gas name in the sector has seen such a dramatic decline, and the last day was in the height of the 2008 financial crisis, according to a market source.

Illumina contracts

Illumina’s 0% convertible notes due 2023 contracted on Tuesday with a large seller in the market, a market source said.

The notes were seen at 104.5 bid, 105 offered. They were down about 0.5 point dollar-neutral, a source said.

Illumina stock closed Tuesday at $313.58, an increase of 0.87%.

Mentioned in this article:

Aegean Marine Petroleum Network Inc. OTCMKTS: ANWWQ

Ensco plc NYSE: ESV

Illumina Inc. Nasdaq: ILMN

Microchip Technology Inc. Nasdaq: MCHP

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