Tyco deal buzz resurfaces, El Paso hit again on S&P cut, retail names get grateful lift

By Ronda Fears

Nashville, Dec. 2 - The convertible market's strong start fizzled as the day wore on, but moods turned positive late in the session on a blurb that revived talk of a big new deal from Tyco International Ltd.

Market sources expect at least one new deal this week, although no details have surfaced yet.

With better-than-expected post Thanksgiving sales, retail names firmed nicely, but the positive tone was dampened by weak manufacturing data. J.C. Penney Co. Inc. was one of the strong retail gainers.

Tech and telecom names like Advanced Micro Devices Inc. and Nortel Networks Corp., though, remained positive for the entire session.

On a negative note, El Paso Corp. sank again as Standard & Poor's cut the credit to junk, on the heels of a Moody's downgrade to junk last week.

"No one knows how much it's going to cost El Paso due to the Moody's downgrade, and now there's the S&P downgrade," said Stuart Novick, convertible analyst at Salomon Smith Barney.

"It's hard to really get a handle on their liquidity situation."

El Paso's convertibles were all quoted roughly 0.5 point lower on the S&P downgrade.

The 0% convertible bond was quoted at 29.5 bid, 30 asked. The 4.75% convertible preferred due 2028 was quoted at 18 bid, 18.5 asked. The 9% mandatory was quoted at 28.375 bid, 28.625 asked.

El Paso shares ended off 26c to $8.26.

Most of the news out there, however, had a positive spin and helped edge the market slightly higher.

Retail names were strong on sales news from J.C. Penney and Wal-Mart Stores Inc.

J.C. Penney said sales during the Thanksgiving weekend hit a record and were "significantly above" last year's level, although no exact figures were reported.

The J.C. Penney 5% convertible due 2008 gained 1.875 points to 110.5 bid, 110.625 asked as the stock rose 84c to close at $24.57.

The buzz about Tyco's plans for a $2.5 billion to $4 billion convertible, which began a couple of weeks ago, resurfaced as an outcrop of a blurb on Briefing.com that the accounting probe of Tyco's books could be completed as early as Tuesday. Reportedly, the new deal hinged on getting the probe finished first.

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