Morning Commentary: Weatherford launches mandatory; traders eye Southwestern Energy, WPX

By Rebecca Melvin

New York, Sept. 21 – Convertibles players were sizing up Weatherford International plc’s offering of mandatory exchangeable subordinated notes, which the company launched early Monday for pricing after the market close. The deal looked about 1% cheap using a three skew, a Connecticut-based trader said.

There was no gray market in the new Weatherford paper at late morning, sources said.

Weatherford, the international oilfield service company based in Baar, Switzerland, launched an offering of mandatories and common stock for combined proceeds of $1 billion plus a greenshoe. The deal size proportions were not yet determined.

The notes were expected to come with a coupon of 6.25% to 6.75% and with an initial conversion premium of 22.5% to 27.5%.

While the new deal looked cheap, a New York-based trader said, that due to the fact that there are already sizable mandatory deals existing in that sector from Southwestern Energy Co. and WPX Energy Inc., this new paper will have to price cheaper to generate interest.

Southwestern Energy priced $1.73 billion of mandatory convertible preferreds in January with a 6.25% dividend, and WPX priced $350 million of 6.25% mandatory convertible preferreds in July.

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