Prudential longer paper gains; ImClone weaker; Advanced Micro mostly quiet on lowered outlook

By Rebecca Melvin

New York, Dec. 4 - Prudential Financial Inc. saw its longer-dated convertibles gain handily Thursday amid a raft of headlines from the Newark, N.J.-based insurer's investor meeting regarding lower guidance, eligibility for TARP funds and the fact that it plans to sell its minority stake in Wachovia Securities brokerage to Wells Fargo & Co.

ImClone Systems Inc. traded a little weaker again on Thursday, extending the trend for at least three days amid uncertainty about when the company plans to payout for its convertible debt following the takeover by Eli Lilly & Co. The convertible paper was trading Thursday with a 97 handle.

Separately, Advanced Micro Devices Inc. was mostly quiet but did trade a bit in response to negative outlook news. Its two convertible issues were slightly mixed to little changed.

The Sunnyvale, Calif.-based chipmaker announced it expects revenue to drop roughly 25% from the third quarter, equating to roughly $1.18 billion, which is below the consensus forecast of $1.54 billion.

The market overall was weak and trading was light, convertibles players said.

Everyone seems to be watching what's going on on TV, a New York-based sellsider said, suggesting the market was awaiting some indications of the U.S. automakers' futures from the top executives' appearance before the Senate Banking Committee Thursday.

Ford Motor Co. convertibles looked to be little changed in trade, but the convertibles of General Motors Corp. were lower by 10% to 20%. The common shares of both companies were lower.

Freeport-McMoRan Copper & Gold Inc. continued to drag Thursday, the day after it cut its copper output and sales forecasts for the next two years in response to weak demand for the metal and said it would suspend its dividend to conserve cash.

"There was a lot of quoting as well as trades," a sellsider said of FCX.

There was also some activity in Dominion Resources Inc., which said it's amending its 2.125% convertibles to add call protection.

Enzon Pharmaceuticals Inc.'s 4% convertibles due 2013 traded at 68.5 on tender offer news.

The Bridgewater, N.J.-based biotech will purchase $100 million worth of its convertibles using a modified Dutch auction tender offer.

Under the procedure, Enzon would offer to purchase a portion of the outstanding principal amount at a price currently expected to be not greater than $750 or less than $700 per $1,000 principal amount, plus accrued and unpaid interest.

OSI Pharmaceuticals Inc. wasn't cited in trade, but its convertibles were indicated lower. The Melville, N.Y.-based mid-cap biotechnology concern said during an investor presentation that an accounting rule change was going to raise the debt interest expense associated with two of its convertible note issues, the 2025 notes and the 2038 notes.

Issuer buybacks continued at a rapid pace - with RF Micro Devices Inc. among the latest, saying it would buy back 10% of its 2010 convertibles - as investors take advantage of discounted pricing.

The fact that the convertibles universe is shrinking could hold a silver lining in terms of pricing, however, as eventually it will prove bullish for the currently unwanted longer-dated paper out there, a sellsider said.

Prudential longer put rises

There was a lot of activity in Prudential's floating-rate convertibles due 2037, which jumped to 90.25 bid, 90.50 offered, up from 87, traders said. The paper is putable in six months.

Prudential's floating-rate convertibles due 2036, which can be put back in eight days, were pretty steady at 99.5.

The company didn't mention anything Thursday about possibly sweetening this paper to keep it outstanding.

Shares of the Newark, N.J.-based financial services and insurance company also rose, up $0.36, or 3%, to $21.17.

The company plans to sell its stake in Wachovia for $5 billion, and it will also seek capital from the U.S. Treasury Department's rescue program to bolster its finances.

In addition, the insurer said it will report a fourth-quarter loss of $1.10 to $1.30 per share, its second straight quarterly loss, and it forecast earnings below analyst estimates for 2008 and 2009.

On Monday, Fitch Ratings cut Prudential's senior debt rating to A- from A and the financial strength ratings of Prudential's life insurance subsidiaries to AA- from AA. The outlook is negative.

ImClone extends weakness

ImClone's 1.375% convertibles due 2024 traded at 97.75 on Thursday, down from 98.25 on Wednesday and 99.375 on Tuesday.

There is uncertainty about at what point the bonds' takeover provision, or poison put, will kick in.

ImClone said earlier this week that it intends to pay out the convertibles May 20, when there is a natural put. But there has been some questioning about exactly what the indenture says, and one trader expected more clarity on the subject from the company by the end of Friday.

"In the meantime, people are erring on the side of caution. The longer duration changes the yield," he said.

Advanced Micro little changed

Advanced Micro Devices' 6% convertibles due 2015 remained in the 29 to 30 context Thursday, compared to the 29.5 to 31 range on Wednesday.

Advanced Micro Devices' 5.75% convertibles due 2012 were about 36 to 37, about where they were Wednesday.

"I haven't noticed much trading," a Connecticut-based sellsider said. But a New York sellsider reported trades at 30 and 37 for the 6s and 5.75s, respectively, which looked little changed to slightly mixed compared with Wednesday.

AMD's common stock settled down 12 cents, or 5.5%, at $2.08.

The semiconductor company slashed its fourth-quarter sales view and predicted a 25% decline from the third quarter due to weaker-than-expected demand across all geographies and businesses, particularly in the consumer market, the company said.

Demand was weaker pretty much across the board, chief financial offer Bob Rivet was reported as saying at an investor conference.

Demand for chips used in desktop computers saw the biggest declines.

The company has had seven consecutive quarters of losses.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Dominion Resources Inc. NYSE: D

Enzon Pharmaceuticals Inc. Nasdaq: ENZN

Ford Motor Co. NYSE: F

Freeport-McMoRan Copper & Gold Inc. NYSE: FCX

General Motors Corp. NYSE: GM

OSI Pharmaceuticals Inc. Nasdaq: OSIP

Prudential Financial Inc. NYSE: PRU

RF Micro Devices Inc. Nasdaq: RFMD

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