Peabody Energy, Chesapeake convertibles trade up outright; Priceline busy; Blucora firms

By Stephanie N. Rotondo

Seattle, Nov. 15 – The convertible bond market was seeing signs of strength in Tuesday trading.

“There’s a bit of a reversal from the ‘Trump trade’ of the last few days,” said one trader. “Bonds rallied after a pretty severe four-day sell-off.”

The trader also noted that the energy sector was “well bid” with gains in oil prices and metals.

For its part, domestic crude oil rose 5.87% on renewed hopes that OPEC will reach a production cut agreement at its Nov. 30 meeting in Vienna.

Peabody Energy Corp.’s 4.75% convertible junior subordinated debentures due 2066, for instance, were trading in a 26 area, according to a trader.

The trader said the paper traded as high as 27 in early dealings.

“They’ve been walking them up all day,” the trader said.

Another market source placed the issue at 27.5.

Coal names – Peabody in particular – have been strong since the election of Donald Trump, as his presidency is expected to have a more positive impact on fossil fuel-related energy producers.

Among oil names, a trader said Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 were up 4.5 points outright, though down half a point on swap.

A second source called the issue up 4 points outright at 96.

The equity meantime rose 58 cents, or 10.6%, to $6.05.

Overall, Priceline Group Inc. was deemed the “top trader” of the day.

“On the run outrights are buying on the dip,” a trader said.

The 0.9% convertible notes due 2021 slipped about a point to a 107.25 to 107.5 context, while the 0.35% convertible notes due 2020 were about unchanged in a 128 to 129 range.

The stock pushed up $8.27 to $1,497.45.

Bayer, PDL added to calendar

The primary market has been muted of late, with just a few deals coming to market – mostly from foreign issuers or smaller domestic issuers.

But Tuesday saw signs of a potential swing toward issuance.

Bayer AG announced a euro-denominated megadeal, a €4 billion offering of subordinated mandatory convertible notes, with a conversion premium of 20% to 25%, according to a press release published Tuesday.

Price talk is 5.125% to 5.625%. Pricing is expected on Wednesday.

The €100,000-par bonds will be issued by Bayer Capital Corp. BV and will be guaranteed on a subordinated basis by the parent company. The notes are mandatorily convertible into shares of Bayer on Nov. 22, 2019.

Proceeds will be used for the early replacement of a portion of the undrawn commitments under a syndicated term loan facility.

Also announced Tuesday was a $150 million offering of convertible senior notes due 2021 from PDL BioPharma Inc.

The notes are convertible under certain circumstances into cash, stock or a combination thereof.

The Incline Village, Nev.-based biopharmaceutical company plans to use proceeds to pay the cost of the capped call transactions and to repurchase a portion of the outstanding 4% senior convertible notes due 2018. Any remaining funds will be used to acquire income-generating assets and pharmaceutical products and for general corporate purposes.

Blucora selling assets

Blucora Inc.’s 4.25% convertible notes due 2019 were “up a little bit,” a trader reported, after it was announced that the company had agreed to sell its Monoprice unit for $40 million in cash.

The trader pegged the convertibles at 98 bid, 98.375 offered.

“It’s contextual,” the trader said of the gains. “They’re just following the stock around.”

The stock traded up 30 cents, or 2.22%, to $13.80.

Blucora, a Bellevue, Wash.-based provider of technology-enabled financial solutions, is selling the unit to YFC-BonEagle Electronic Co. Ltd., a provider of power cord sets and networking peripherals.

The sale is part of the company’s efforts to focus on its core businesses.

The transaction is expected to close in the fourth quarter.

Iconix steady

Iconix Brand Group Inc.’s 1.5% convertible notes due 2018 were also slightly better, as the market prepared for the company’s annual investor meeting.

The meeting was scheduled for 3 p.m. ET.

A trader said the bonds were “up a tiny bit” at 86.5 bid.

He noted that the paper was at 85 a week ago.

The equity was initially a touch higher, moving up 3 cents at mid-morning to $9.67. However, it closed off 7 cents at $9.57.

On Nov. 8, the New York City-based brand management company reported earnings that were mixed. The company also guided expectations for the full-year to the lower end of projections.

While the quarterly results initially resulted in a sell-off in the stock, the company was able to point out positive signs during its conference call that pushed the equity back to where it started.

Mentioned in this article:

Blucora Inc. Nasdaq: BCOR

Chesapeake Energy Corp. NYSE: CHK

Iconix Brand Group Inc. Nasdaq: ICON

Peabody Energy Corp. OTCBB: BTUUQ

Priceline Group Inc. Nasdaq: PCLN

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