Pacira retreats from post-pricing highs; Nabors trends lower; oil names remain under pressure

By Stephanie N. Rotondo

Seattle, March 9 – The convertible bond market was trending weaker in Thursday dealings.

While the space was drifting lower, a trader remarked that it was “really quiet” overall.

Pacira Pharmaceuticals Inc.’s new $300 million of 2.375% convertible senior notes due 2022 continued to be on the active side, after pricing rich late Tuesday.

The issue had jumped above par in midweek trading but gave back some of those gains come Thursday.

Away from the new issue, Nabors Industries Ltd.’s 0.75% convertible notes due 2024 were also deemed weaker.

A trader saw the convertibles at 92.125 toward the end of business. That compared to earlier levels around 93.

The underlying equity was also lower, losing 24 cents, or 1.78%, to end at $13.23.

Despite the weakness in the name – which was driven by the broader market’s losses, nothing credit specific – a trader commented that “people still love the credit.”

Oil-linked names such as Weatherford International plc and Chesapeake Energy Corp. also remained under pressure on Thursday, following an over 5% decline in crude prices on Wednesday. The declines came as the Energy Information Administration reported a larger-than-expected inventory build.

Domestic crude was down over 1% on Thursday, slipping below the $50-mark.

Weatherford’s 5.875% exchangeable notes due 2021 closed in a 123.875 to 124.75 range, a loss of 2 to 3 points.

At mid-morning, the convertibles were a shade lower at 126.75, according to a market source.

The company’s shares fell 9 cents, or 1.4%, to $6.35.

Chesapeake’s 5.5% convertible notes due 2026 were meantime seen in a 93.875 to 94.375 context, off a couple of points on the day.

A trader said the notes were down about a point at mid-morning, trading around 94.5.

However, Chesapeake’s stock managed to gain, likely due to gains in natural gas prices.

The stock finished up 19 cents, or 3.85%, at $5.13.

On Wednesday, the EIA said that oil inventories rose by 8.2 million barrels from the previous week – four times more than analysts had predicted.

The gain was the ninth consecutive increase.

The EIA’s weekly report also showed that production was moving toward 9.1 million barrels a day. That was the highest level seen in over a year.

But the levels also indicated that moves by OPEC, Russia and 10 other oil exporters to stem output amid a global supply glut were not doing much to curb supply.

Pacira comes off highs

Pacira Pharmaceuticals’ new 2.375% five-year convertibles slipped from the previous day’s highs, according to market sources.

At one desk, the paper was seen at 103.625.

A trader said the convertibles were in a 103.5 to 104 range, which compared to levels around 106 on Wednesday.

The company’s stock was meantime down $1.40, or 2.8%, at $47.00.

At pricing, the convertibles carried an initial conversion premium of 37.5%.

J.P. Morgan Securities LLC, Jefferies & Co. and RBC Capital Markets LLC ran the books.

Prior to Oct. 1, 2021, the notes are convertible at the holder’s option only in certain circumstances. After that date, the notes are convertible at any time.

Conversions will be settled in common stock, cash, or a combination, at the company’s election. The initial conversion rate is 14.9491 shares per each $1,000 of notes, equal to $66.89 per share.

On or after April 1, 2020, Pacira can redeem the issue for cash, if the stock hits a 130% price hurdle. A redemption of the issue will constitute a make-whole fundamental change and will, in certain circumstances, cause the conversion rate to increase.

A portion of the proceeds will be used to exchange approximately $112 million of the company’s 3.25% convertible senior notes due 2019 for a combination of cash and shares of Pacira common stock. Remaining proceeds will be used for general corporate purposes, including working capital, research and development expenditures and the license or acquisition of complementary products and/or technologies.

Parsippany, N.J.-based Pacira is a specialty pharmaceutical company.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Nabors Industries Ltd. NYSE: NBR

Pacira Pharmaceuticals Inc. Nasdaq: PCRX

Weatherford International plc NYSE: WFT

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