Cobalt sister convertibles bounce off lows; Nabors down; Shutterfly adds; Weibo deal on deck

By Rebecca Melvin

New York, Oct. 25 – Market players in the U.S. convertibles market were fielding earnings reports from a number of issuers on Wednesday, while Cobalt International Energy Inc.’s convertibles bounced off their lows to trade in the mid-teens as shares slipped below $1.00.

A new deal on the calendar for Weibo Corp. was expected to price after the market close but hadn’t yet priced by Prospect News’ deadline, a syndicate source said.

There was no gray market during the session in the expected Weibo issue, another market source said.

The Beijing-based social media platform company planned to price $700 million of five-year notes convertible into Weibo’s American Depository Shares. Goldman Sachs and Credit Suisse are bookrunners for the deal.

Back in established issues, Nabors Industries Ltd. extended losses, gapping lower by about 2 points on Wednesday to a level of about 75 for the 0.75% convertible due 2024.

On Tuesday, the Nabors bond fell by about 0.75 point on loss of its investment-grade status, a trader said.

Shares of the Hamilton, Bermuda-based land-based and offshore oil and gas services company ended the day little changed at $6.41, which was off by 2 cents.

In earnings news, Shutterfly Inc.’s convertibles were down on an outright basis but expanded on a dollar-neutral, or swap, basis after the Redwood, Calif.-based internet-based image publishing company reported disappointing earnings.

Shutterfly’s 0.25% convertibles due 2018 traded at 99, which was down about 0.4 point outright against shares that fell $4.63, or 9.5%, to $44.20. On swap, the convertibles, which are short-term paper, expanded about a point, a New York-based trader said.

Shutterfly lost $32.5 million on a pro-forma basis, excluding restructuring charges of $3.3 million. Adjusted EBITDA was $3.0 million, and the net loss was $24.0 million, or $0.73 per share.

Shutterfly’s restructuring costs on a year-to-date basis were $17.0 million.

Medicines Co. announced restructuring plans and layoffs of more than 85% of its workforce in tandem with its third-quarter results. Shares of the Parsippany, N.J.-based biopharmaceutical company surged 8% in the pre-open but were last off 46 cents, or 1.4% at $32.39. The Medicines convertibles were not seen in trade.

Ensco plc’s convertibles were down 1.7 points and trading actively against shares that were off 2.5%.

The Ensco 3% convertibles of 2024 were trading at 82.179 versus shares at $4.93, down only 20 cents. Ensco shares closed unchanged at $5.05.

Overall, trading volume was mild and there didn’t appear to be an abundance of investor interest in the new Weibo bond.

“There was no gray market. People don’t talk about these deals the way they used to. There used to be an active gray market, but there aren’t the guys that traded it that way in the past,” a trader said.

Cobalt at mid- to low-teens

The Cobalt 2.625% convertible notes due 2019 ended around 14, after trading up to near 16 during the session, and compared to around 11 late Tuesday. Before the drop on Tuesday, the bonds had been trading around 20, and a year ago, the Cobalt 2.625% convertibles were trading around 50, a New York-based trader said.

The Cobalt 3.125% convertibles due 2024 were seen last at 12.5 and had traded up to about 15 intraday, bouncing off lows around 10 on Tuesday. Before the drop lower on Tuesday, the bonds had been around 19.

Cobalt shares were down by a nickel, or 4.8%, at $0.97, trading at the low mark of recent weeks. The stock closed at $0.98.

The move lower was due to a big seller, according to a trader. “They are bouncing back, but somebody blew out of these on Tuesday,” the trader said by way of explanation for the downdraft.

Now the 2.625% Cobalt convertibles are trading at a 1.5 point premium to the 3.125% convertibles, the trader said.

Mentioned in this article:

Cobalt International Energy Inc. NYSE: CIE

Ensco plc NYSE: ESV

Medicines Co. Nasdaq: MDCO

Nabors Industries Ltd. NYSE: NBR

Shutterfly Inc. Nasdaq: SFLY

Weibo Corp. NYSE: ADS: WB

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