Morning Commentary: Convertibles quiet; energy bankruptcies produce little response in market

By Rebecca Melvin

New York, April 15 – U.S. convertibles were quiet early Friday with a lack of new paper contributing to inactivity even as news of several bankruptcies among convertibles issuers this week did little to spur market action.

“Nothing has changed,” a Connecticut-based trader said despite news that Goodrich Petroleum Corp. has filed for reorganization under Chapter 11 bankruptcy and confirmation from SunEdison Inc. that is has entered into confidentiality agreements with certain lenders regarding proposed debtor-in-possession financing, a precursor to bankruptcy.

The Goodrich Petroleum convertibles “don’t trade anymore; they are at zero,” the trader said. The SunEdison convertibles were trading a little lower, pulling back to the 4 bid, 5 offered level after having risen to about 6.5 on Thursday.

On Thursday, news that Energy XXI Ltd. filed for Chapter 11 did spur some trading activity in the 3% convertible due 2018, the trader admitted, but there was no change to speak of in pricing as those bonds were already trading below 1.

On Wednesday, Peabody Energy Corp., the St. Louis-based coal producer, filed for Chapter 11 bankruptcy protection to little effect in the convertibles market.

Traders said the filings were expected, so most of the movement had occurred in the months and weeks prior to the filings. Asked if traders were looking for the next shoe to drop, one trader said, “SunEdison still has to file.”

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