Hybrid Vigor: Vol 2 Issue 2 "Hot! Hot! Hot!"

Dear Friends,

The one thing we know about the remarkable collapse in energy prices is that it will factor prominently in this year’s convertible activity.

As we go to press Southwestern Energy is marketing a big mandatory and equity deal to repay a big bridge loan.  Given the troubles in energy and the size of the deal—about $2 billion in aggregate if the shoes get exercised—the pricing needs to be attractive, and it appears to be at first glance.  We suspect there’s more where that came from. Energy woes also figured prominently in last week’s HOCS 20 performance, as you’ll see inside.

Curt Peters discusses some revolutionary developments in this week’s Ugly 20.  No revolution worth its salt takes place without a prominent figure in red, and this week is no exception. You’ll see, if you haven’t figured it out already.

Our old friend Sandisk, meanwhile, is doing what it does best, taking a beating this morning.   Sandisk has been a controversial inclusion on the Ugly 20—it’s been there because of its multidimensional exposure to losses. Today, it’s the directional aspect.  Granted, the bond has tended to perform well during the flatter times.  Let’s just say the price point continues to be very tricky. Sandisk’s 0.5% came in at 11.26 Hillside Adjusted Risk Points (HARP) in our first edition. Coming into today, the score was 10.39. That’s a touch of cheapening but nothing compared with what’s happened to some of the other names on the list. It will be interesting to see how it shakes out today for hedgers. We know the outrights aren’t happy.

Speaking of hedgers, we have a feature today showing that our HOCS (Hillside Overall Convertible Score), primarily a tool for evaluating new deals and bonds within range of par, can also be helpful for identifying interesting setup candidates. Read on.

You won’t be able to read on much longer, though, if you don’t subscribe. We’re coming down to the wire. Many of you have connected with John Anderson at janderson@hillsideadvisors.com or (646) 665-4025.  If you haven’t yet and want to make sure you don’t miss Hybrid Vigor or our intraday comments, please be sure to speak with John this week.

Bill

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