Convertibles outperform in latest rout; SunEdison weakens in active trade; Chesapeake down

Rebecca Melvin

New York, Aug. 26 – SunEdison Inc.’s multiple convertible issues weakened again in active trade on Wednesday as the name continues to vex the convertibles market. But equities snapped a six-day losing streak, with the rally accelerating into the market close, helping buoy the overall convertibles market.

The SunEdison paper was “in about 1 point on swap, on average,” a Connecticut-based trader said.

The move represented the continuation of a trend that has been in place for about a month among the company’s six outstanding convertible issues.

“It’s a sizable part of the convert market, so it will have an impact,” a New York-based analyst said regarding SunEdison. “Those with exposure in their portfolio will be impacted.”

Another name that has been a drag on the convertible market is Chesapeake Energy Corp. The energy company, which is another serial issuer in the space, has seen its stock slide 68% since the beginning of the year to almost $6.00 and down from a 52-week high of $27.00.

Likewise the Chesapeake convertibles have tumbled, with the longer-dated Chesapeake paper suffering by a greater magnitude than the shorter-dated issues.

Cobalt International Energy Inc. has also been irksome for the convertibles market, but this week it improved after news of an agreement to sell assets in Angola for $1.75 billion.

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