Chesapeake Energy preferreds, bonds mixed after dividend suspended to buy back debt

By Rebecca Melvin

New York, Jan. 22 – Chesapeake Energy Corp.’s convertibles were mixed on Friday after the Oklahoma City-based natural gas producer said it suspended dividend payments on each series of its convertible preferred stock to save money to buy back debt.

Chesapeake will use the savings of about $170 million per year “to purchase debt at significant discounts in the near term,” according to a company news release.

Traders anticipated the company would take measures in the near term to address its debt, so the convertibles were not actively traded nor were they indicated sharply lower or higher.

The stock borrow behind Tesla Motors Inc.’s convertibles eased, and those bonds improved by about a point on swap after being constrained on Thursday, a New York-based trader said.

Cobalt International Energy Inc.’s 3.125% convertibles due 2024 traded up to 39 bid, 40 offered from about 48 against higher shares for the Houston-based energy exploration & production company on Friday as oil prices surged.

West Texas Intermediate crude oil for March delivery jumped $2.61, or 9%, to $32.14 per barrel.

The S&P 500 stock index, which fell to 2014 lows earlier in the week, surged more than 2% on Friday to end the week up 1.4% at 1,906.90. The Dow Jones industrial average climbed 210.83 points, or 1.3%, to 16,093.51 and the Nasdaq stock market added 119.12 points, or 2.7%, to 4,591.18.

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