Pioneer Natural, Massey Energy trade little changed after earnings; financial preferreds continue to slide

By Rebecca Melvin

New York, Feb. 4 – Prompted by earnings news and movements in underlying shares, convertible bonds traded mixed Wednesday, market sources said.

Pioneer Natural Resources Co. traded unchanged outright, as its shares sagged the day after the oil and gas E&P reported a quarterly loss.

Massey Energy Co. was better bid, but didn’t trade much, as its shares swung lower after the coal mining concern reported better fourth-quarter profit, but missed estimates, and said it would scale back capital expenditures.

Advanced Micro Devices Inc. convertibles continued to strengthen, although sources queried couldn’t pinpoint a specific reason for the improvement.

Weakness in financials persisted as underlying shares attempted to recover but ultimately extended moves to the downside. Bank of America Corp.’s convertible preferreds traded down into the 300s from the 400s on Tuesday. Huntington Bancshares Inc. convertible preferred shares slipped to 304 as their shares slumped by 20%.

Uncertainty about what the future holds for the U.S. financial system continued to roil markets. The Obama administration announced that it will impose caps on executive compensation of the banks that receive federal assistance, but there has been little clarity on the plan itself, which is expected to be announced next week.

Bank of America was the focus of short sellers, who foresee potential nationalization of the bank, one sellsider said.

Overall, the market appeared to move with stocks, sources said. “There was a lot of noise this morning, but I’m not sure there was a lot of volume,” a Connecticut-based sellside analyst said. “It appeared that people were just making adjustments with all the preannouncements and things.”

Pioneer, Massey little changed outright

Pioneer Natural’s 2.875% convertibles due 2038 traded between 74 and 75, which was essentially unchanged on Tuesday; but shares of the Irving, Tex.-based oil and gas company traded in negative territory throughout the session, settling down 47 cents, or 3%, at $14.29.

The company, which priced $500 million of the 2.875% convertibles a year ago, reported a loss of $65 million on increased sales.

During the fourth quarter, the company purchased $107 million face value of debt securities for $70 million.

The company also said it liquidated oil and gas derivatives in December covering 2009 and 2010 for proceeds of $143 million, which were used to reduce debt and fund share repurchases; and that it put in place new oil and gas derivatives for 2009 to protect cash flow.

Massey’s 3.25% convertible senior notes due 2015 traded at 63 and 63.125, which was little changed from previous levels, while shares of the Richmond, Va.-based coal producer fell $1.90, or 12%, to $13.37.

The company said that fourth-quarter profit jumped to $53.6 million, compared to $5.1 million in the year earlier period, but the figure missed estimates.

Citing falling demand for coal from the steel making industry, Massey also said that it would scale back 2009 capital expenditures to $375 million from $500 million.

B of A, Huntington continue to drop

B of A’s 7.25% convertible preferreds traded at 385 during the session, and were seen settling lower at 360, versus a share price of $4.70, which was down 60, or 11.3%.

That compares with a level right around 400 on Tuesday. Last week, this paper was 460.

Common share trading volume remained elevated, at many times above the three month running average.

“Shorts’ theory” that Bank of America will be nationalized was feeding the slide, a New York-based sellside trader said.

“CNBC spoke about the BAC Pfd L – so I guess that it’s the one the short crowd is focusing on,” the sellsider said. “The dividend can be deferred, but so can the dividend on the trust preferreds trading at 71.”

Meanwhile, Huntington Bancshares’ 8.5% convertible perpetual preferred was last seen 304, the sellsider said.

He said both Huntington and Fifth Third Bancorp common and preferred shares sank after a PNC Financial presentation Tuesday that highlighted the extent of issues facing the banks.

Shares of Huntington, an Ohio-based regional bank, fell to $1.44 on Wednesday, which was down 37 cents, or 20%, in extremely heavy volume.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Bank of America Corp. NYSE: BAC

Huntington Bancshares Inc. Nasdaq: HBAN

Massey Energy Co. NYSE: MEE

Pioneer Natural Resources Co. NYSE: PXD

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