Convertibles ‘for sale’ as equities fall; Stone Energy drops to 55, Fluidigm to below 50

By Rebecca Melvin

New York, Jan. 20 – Convertibles traded down Wednesday amid another hard sell-off in the crude oil and equity markets. The general tone in convertibles was “pretty sour,” and market players were marking the bonds on their books down on little to no trading, a New York-based sellsider said.

“Things are definitely better for sale today,” the sellsider said.

West Texas Intermediate crude oil for February delivery dropped more than 5% to a handle of $26.00 per barrel after dropping 4% on Tuesday. The price for this contract at the end of December was about $37.00 per barrel.

The convertibles of Stone Energy Corp. fell below 60 after trades earlier in the session above that level. The Stone Energy 1.75% convertibles due March 2017 were last 54.69 to 55, a New York-based trader said.

Shares of the Lafayette, La.-based oil exploration and production company fell 20% to $1.93.

The Stone Energy convertibles don’t trade often, but they were down to 60 in small size and offered at 61 to 62 in larger size, with no bids, a second New York-based trader said earlier in the day.

The Stone convertibles traded on Jan. 6 at 72 bid, 72.5 offered and on Dec. 10 at 84.75 to 85, a New York-based trader said.

The convertibles of WPX Energy Inc. underperformed the common shares, with the mandatory convertible paper trading down $2.31, or 10%, to $20.34, while the WPX common shares ended off only 6%.

Energy restructuring has suddenly become a busy area for Wall Street, but the range of the affliction has widened from energy, mining, coal and metals, to stories like Wal-Mart Stores Inc. closing down stores. “There is now a systemic issue that was originally all driven by commodities,” a New York-based market source said.

About 20% of the high-yield index is energy, and roughly half is lower rated. It is not so much the volume of debt outstanding but the sheer number of issuers and lower-rated issuers that is troubling, the market source said.

Elsewhere, Fluidigm Corp.’s convertibles dropped more than 8 points against a 16% slide in the underlying shares of the San Francisco-based genomics and DNA research company. A small lot of the Fluidigm 2.75% convertibles due 2034 crossed at what looked like 47.5 bid, 48 offered, a trader said. Earlier the market in this name was seen at 42 bid, 52 offered. That compared to Tuesday’s trade at 56 versus an underlying share price of $7.44.

Fluidigm shares ended down $1.22, or 15%, at $6.22. They had been down by more than 30% earlier in the session. Cowen & Co. had downgraded the shares.

A very small lot of Navistar International Corp.’s convertibles saw a 40 bid hit, a New York-based trader said at the end of Wednesday. The Navistar 4.75% convertibles were trading at 41.5 bid, 44.5 offered on Tuesday and were at least 5 points higher than that previously.

Meanwhile Navistar shares closed up 47 cents, or 8%, to $6.70.

Bucking the weight of the broader market, Medicines Co.’s 2.5% convertibles due 2022 traded up about 4 points to 117 as shares of the Parsippany, N.J.-based health care company jumped $4.55, or 14%, to $36.06 after it was reported that the company is exploring a sale of itself. A deal would extend a robust trend in 2015 when a record $600 million worth of health care company deals were announced or completed.

Liquidity was becoming more of an issue, with lower-liquidity names not having a bid, a New York-based trader said. “No one is looking to put on new or more risk.”

Mentioned in this article:

Fluidigm Corp. Nasdaq: FLDM

Medicines Co. Nasdaq: MDCO

Navistar International Corp. NYSE: NAV

Stone Energy Corp. NYSE: SGY

WPX Energy Inc. NYSE: WPX

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