Cobalt trading frenzy goes on; Array jumps up; WWE smacked down; EZCorp strengthens

By Abigail W. Adams

Portland, Me., Dec. 22 – Secondary market activity in the convertible bond market slowed to a crawl on Friday as market participants headed for the door before the year-end holidays.

While the markets were quiet on Friday, the trading frenzy surrounding Cobalt International Energy Inc.’s 2.625% convertible notes due 2019 and 3.125% convertible notes due 2024 continued.

Array Biopharma Inc.’s 2.625% convertible notes due 2024 jumped more than 5 points in scattered trades, as the company’s underlying equity soared.

Array announced a partnership with Pfizer on Dec. 19 for a clinical trial to test combining the cancer fighting drugs of both companies.

Array also announced on Dec. 21 that it was transferring one of its rare drug programs to Yarra Therapeutics, a wholly owned subsidiary formed to develop treatments for rare diseases.

World Wrestling Entertainment Inc.’s 3.375% convertible notes due 2023 dropped 10 points as its equity tanked after news broke CEO Vince McMahon sold 3.34 million of his class A common shares in the company.

While not active on Friday, EZCorp Inc.’s 2.875% convertible notes due 2024 continued their upward momentum to reach 140, versus a stock price of $12.30 on Thursday. One market source pointed to the 2.875% convertible notes as one of the best deals of 2017.

Cobalt continues

Cobalt’s 2.625% and 3.125% notes have dominated trading activity since the bankrupt petroleum and natural gas exploration company announced a $500 million settlement for its interests off the coast of Angola on Wednesday.

That trading frenzy continued on a quiet Friday before the Christmas break.

After weakening on Thursday, both notes made nominal gains on Friday.

Cobalt’s 3.125% notes traded as low as 21.8 before ending Friday’s session at a high of 25.75, according to Trace data. Cobalt’s 2.625% notes traded down to 23.9 but ended the session at 25.5.

The notes were trading in the 10 to 11 range in the run up to Wednesday’s announcement.

Investors are now looking to the amount the Houston-based company’s Gulf of Mexico property is worth to determine how much they will receive in the distribution of the company’s assets, a market source said.

Array jumps

Array jumped about 5 points in scattered trades, as the company’s underlying equity continued its upward climb. The notes were trading in the 105 to 106 range but jumped to trade as high as 111.127 on Friday, according to Trace data.

The company’s underlying equity continued to soar after a steady climb throughout the week. Array’s stock closed Friday at $12.27, an increase of 9.55%. The stock has steadily risen since its Monday close of $10.80.

The Boulder, Colo.-based biopharmaceutical company, which is focused on small-molecule drugs to treat patients afflicted with cancer and inflammatory diseases, announced on Tuesday a partnership with Pfizer.

The two companies will jointly conduct clinical trials to test the safety of combining their drugs for cancer treatment.

Array also announced in a Securities and Exchange Commission filing on Thursday that it was transferring its program focused on the treatment of a rare, degenerative cardiovascular disease to its wholly owned subsidiary Yarra.

The formation of Yarra for the purpose of taking over the drug program was a consideration when Array issued its 5% convertible notes due 2017 in a note purchase agreement with Redmile Capital.

Yarra intends to seek third-party equity financing for working capital, according to the SEC filing.

WWE tumbles

WWE’s 3.375% convertible notes due 2023 tumbled alongside its equity during scattered trades on Friday after CEO McMahon announced his sale of $100 million of company stock.

The convertible notes were trading in the 144 to 145 range but tumbled to 134 in scattered trading activity Friday. WWE stock was down to $29.55, a decrease of 7.28%, at market close.

McMahon’s sell-off was done to fund Alpha Entertainment LLC, a company formed by McMahon to explore investment opportunities in sports and entertainment, in particular professional football.

There is widespread speculation that McMahon is attempting to revive the XFL, a short-lived professional football league that played one season in 2001.

EZCorp adds

While not active on Friday, EZCorp’s 2.875% convertible notes due 2024 continued their upward momentum, reaching 140 versus a stock price of $12.30 on Thursday.

One market source pointed to the 2.875% convertible notes as one of the best deals of 2017. “It was a small deal but it was a good performer,” a market source said.

Since $162.5 million of the 2.875% notes were issued in June, the Austin, Texas-based operator of pawnshops has seen its stock rise about 50%. The 2.875% convertible notes expanded alongside the equity.

“The notes captured about three-quarters of the upside,” a market source said.

Mentioned in this article

Cobalt International Energy Inc. OTCMKTS: CIEIQ

Array Biopharma Inc. Nasdaq: ARRY

World Wrestling Entertainment Inc. NYSE: WWE

EZCorp Inc. Nasdaq: EZPW

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