Convertibles steady; Alcoa quiet but holds gains; Qwest Communications adds, but Amylin eases

By Rebecca Melvin

New York, April 3 - Convertibles trading quieted Friday after a rush of activity Wednesday and Thursday, but pricing remained firm, trading sources said.

Alcoa Inc.'s 5.25% convertibles, which priced on March 18, were not heard in trade Friday, a New York-based sellside trader said, but they were indicated to have held gains notched Thursday.

"Alcoa was bid all day on Thursday, but today I haven't heard a single thing. It's much quieter than it's been all week," the sellsider said of Friday's session.

Ingersoll-Rand Co. Ltd. and Newell Rubbermaid Inc., also newly priced issues, traded higher, both to the upper teens level, although they weren't overly active.

Qwest Communications International Inc. convertibles continued to show strength, adding to 97, amid reports that the Denver-based telecom is seeking to sell its long-haul telecommunications network for up to $3 billion, a sellside trader said.

But Amylin Pharmaceuticals Inc. came off Friday in line with its shares after investors were concerned about a mixed Food and Drug Administration panel review about a diabetes drug, of which Amylin's drug candidate, exenatide LAR, competes.

Alcoa holds gains

Alcoa's 5.25% convertibles due 2014 were quiet on Friday but indicated to close steady at Thursday's level, which was 145.625 versus a share price of $8.18, compared with 135.6 versus a share price of $7.60 on Wednesday, according to a pricing source.

Shares of the Pittsburgh-based company settled Friday at $8.17, which was little changed versus $8.18 on Thursday.

The company's stocks and bonds had jumped on Thursday along with the overall market as optimism was fanned regarding recovery of the global economy and financial system.

On Thursday, new guidelines adopted by the Financial Accounting Standards Board ease mark-to-market accounting rules, a move expected to help banks by allowing their assets to be valued at what they would be in an orderly sale as opposed to forced or distressed sales.

The new guidelines also allow banks to avoid reporting some losses on securities by splitting them among factors like fluctuating interest rates that won't have to be counted toward net income or loss.

Ingersoll-Rand, Newell higher

Although one trader reported that he had not seen any markets or trading in the Ingersoll-Rand newly priced 4.5% convertibles due 2012, another source said his firm traded them at 117.25 versus a stock price of $16.00.

That level was up from the paper's debut on Wednesday when they were seen closing out at about the 110 level.

"It was a fairly slow, rainy morning. There was no action in the IRs, but Teradyne was offered for 113.5 versus a share price of $4.78," the sellsider said.

Teradyne Inc. also priced a new issue of convertibles this week. They were 4.5% five-year paper with a 25% initial conversion premium.

Newell, which priced on March 24, traded Friday at 118 versus a stock price of $7.20.

Qwest moves up

Qwest's 3.5% convertibles due 2025 traded at 97 late in the session versus a share price of about $3.90.

"Those just keep going up, and up, and up," a New York-based sellside trader said. "They've been strong all week on news out that they are selling their long-haul network."

Another pricing source had them previously at 94.

The Wall Street Journal reported Wednesday that the company is planning to sell a piece of its network to pare its high debt load, and that potential bidders include AT&T Inc., Verizon Communications Inc. and Level 3 Communications Inc.

Qwest stock was up 31 cents, or 8.6%, to $3.91 on Friday.

Amylin edges lower

Amylin's 2.5% convertibles due 2011 traded at 82 on Friday compared to 86.5 versus a share price of $12.00 on Tuesday.

Shares of the San Diego-based biotech fell 64 cents, or 6%, to $9.68 on Friday, down from a closing high of $11.75 on Tuesday.

Investors weighed news that Novo Nordisk A/S received a mixed FDA panel review on whether its diabetes drug should be approved in the face of safety concerns over tumors.

Nordisk is developing a diabetes drug called liraglutide. Amylin is developing a diabetes drug called exenatide LAR.

Lazard Capital Markets lowered its rating on Amylin to "hold" from "buy," citing concerns that the company's drug candidate might run into the same regulatory problems as did the Denmark-based Novo Nordisk.

"Exenatide LAR may deliver a cleaner preclinical safety profile than liraglutide, but we wonder if less than 500 patients from exenatide LAR's Duration-1-3 trials are sufficient to address the FDA's concern yesterday over a potential 'class effect' for thyroid cancer that could increase with longer-acting agents, and if additional trials would be required," Lazard analyst Matthew Osborne wrote in a research note.

Earlier in the week, the Amylin convertibles were better in trade as investors started to "poke around" in biotechnology names, a sellsider had said at that time.

Mentioned in this article:

Alcoa Inc. NYSE: AA

Amylin Pharmaceuticals Inc. Nasdaq: AMLN

Ingersoll-Rand Co. Ltd. NYSE: IR

Newell Rubbermaid Inc. NYSE: NWL

Teradyne Inc. NYSE: TER

Qwest Communications International Inc. NYSE: Q

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