Chesapeake Energy gaps down; AMAG continues trajectory lower; Vodafone prices £600 million

By Rebecca Melvin

New York, Nov. 19 – Convertibles players turned sellers in another mainstay on Thursday: Chesapeake Energy Corp.’s convertibles slumped 5 to 9 points amid no particular news regarding the oil and natural gas company, market players said.

The slump came on top of losses suffered last week when Chesapeake convertibles dropped 3 points to 5 points on swap from Wednesday to Friday.

“There’s a lot of pain being felt in convertibles,” a New York-based trader said, referencing a wave of selling that swept over SunEdison Inc. and now selling in Chesapeake.

SunEdison melted down last week into this week. The SunEdison 3.375% convertibles due 2025 fell to about 26.50 on Thursday from 30ish as shares slid another 12% to $2.86. Last week this issue was in the 40s.

Other names also lost ground. GNC Holdings Inc.’s 1.5% convertibles due 2020, of which $250 million priced last summer, looked to have contracted about 1.5 points on swap, a second New York-based trader said.

The GNC bonds traded at 79.25 bid, 80.25 offered versus an underlying share price of $28.50. Shares of the Pittsburgh-based specialty health and wellness retailer closed fractionally lower at $28.52, which was off 0.6%.

AMAG Pharmaceuticals Inc.’s convertibles were also for sale on Thursday as shares of the Waltham, Mass.-based specialty pharmaceutical company fell in response to a regulatory setback for its Makena drug.

The Food and Drug Administration asked for further information about AMAG’s application seeking approval for a single-dose vial of Makena, which is used to reduce the risk of preterm birth.

BioMarin Pharmaceutical Inc. had the eye of some convertibles players ahead of an FDA advisory panel for approval of the company’s drisapersen drug that is expected imminently.

The panel discussion is likely to have an impact on related biotech stocks, including PTC Therapeutics Inc. The PTC shares slumped 13% on Thursday, but a positive drisapersen panel is likely to boost the name.

The U.S. primary market was quiet on Thursday, but internationally, London’s Vodafone Group plc launched and priced £600 million of five-year 0% equity-linked bonds with a 30% initial conversion premium. The premium is based on a volume weighted average price of the company’s ordinary shares for the next 10 trading sessions.

The 0% coupon compared 0.4% to 1.2% talk for the coupon.

Chesapeake trounced

Chesapeake’s 2.5% convertibles, which have a 1.5 year put/call, were trading at 67 to 67.25 early Thursday and were seen 68 bid, 69 offered at the end of the day. That was down about 8 or 9 points since Wednesday and down from 81 bid, 82 offered six days ago, sources said.

The Chesapeake 2.25% convertibles, with a three-year call/put, were 42 bid in the early going but were not seen to have traded.

There was “no real story,” but there was a rumor in the market that there was a large fund liquidating its position in Chesapeake, a trader said.

The rumor was causing the whole complex to sell off. The Chesapeake straight bonds fell 4 points to 13 points, and the convertibles were down 5 points to 8 points, the trader said.

“There has been some real pain in SunEdison,” the trader said, and now that is being compounded by Chesapeake.

AMAG comes in on swap

AMAG’s 2.5% convertibles due 2019 were quoted at 118.75 bid, 119.25 offered with the shares at $26.85.

AMAG shares were last down $2.38, or 8.2%, at $26.68.

The AMAG bonds were seen to have contracted by at least a point on a swap basis, a trader said.

The drop is the latest in a continuing slide in this name, the trader said. Earlier this month the convertibles tumbled with shares on an earnings miss.

On Oct. 22, the bonds were 134.625 bid, 135.625 offered versus an underlying share price of $31.40 and before that they were around 160.

AMAG shares fell $9.55, or 23%, to $31.61 in heavy volume on Tuesday.

The move represented a “continuing slide in this name.” a trader said.

AMAG guided full-year estimates for its largest drug, Makena, lower, although total full-year revenue remained in line with previous expectations.

AMAG was the most actively traded name among health care convertibles.

“AMAG shares are down a lot, and the bonds are for sale,” a trader said.

Vodafone prices large deal

London-based Vodafone priced a £600 million Regulation S convertible on Thursday. The five-year equity-linked bonds came at par with a 0% coupon and 30% initial conversion premium, which was the rich end of coupon talk and at the talked price point for the premium.

The share reference price will be based on the volume-weighted average price of ordinary shares over 10 trading days beginning Friday until Dec. 3.

The deal was priced together with the purchase of cash-settled call options on Vodafone’s ordinary shares from Morgan Stanley & Co. International plc or its affiliates. The bonds will be cash settled.

Proceeds are earmarked for general corporate purposes and for the purchase of the call options.

Vodafone plans to apply for the bonds to be admitted to trading on the Irish Stock Exchange's EEA Regulated Market or another recognized stock exchange.

Morgan Stanley & Co. International plc and HSBC Bank plc are joint bookrunners of the offering.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Chesapeake Energy Corp. NYSE: CHK

GNC Holdings Inc. NYSE: GNC

PTCT Therapeutics Inc. Nasdaq: PTCT

SunEdison Inc. Nasdaq: SUNE

Vodafone Group plc London:VOD

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