Ford drops to mid 60s amid higher oil; Suntech Power loses 0.5 point; Amylin trades with hopes for Byetta

By Rebecca Melvin

New York, Aug. 25 - A sharp slide in stocks contributed to convertibles players being mostly sidelined on a late summer Monday. Headlines crossing the tape prompted some calls from fund managers to broker-dealers, but few were pressing enough to precipitate many trades, sources said.

Ford Motor Co. convertibles, which have been trending down for several sessions, were sharply lower on Monday as its shares fell to their lowest level in decades amid higher oil prices and expectations of low U.S. auto sales for August.

Suntech Power Holdings Co. Ltd. traded about half a point lower amid overall weakness in the solar power sector. But LDK Solar Co. Ltd. saw its stock higher after boosting guidance for 2009; its convertibles, however, were quiet.

Amylin Pharmaceuticals Inc. traded up 1 to 2 points as its shares gained 4.5% amid comments from analysts that perhaps the hit suffered last week when the Food and Drug Administration announced problems related to its Byetta diabetes drug were overblown.

Fannie Mae edged a little higher also after the big drop it suffered last week, although the move was negligible on a dollar-neutral basis.

Names in focus, but not seen in trade included Advanced Micro Devices Inc., which announced it is selling a business in a move viewed as favorable to credit, but not overly important due to the size of the deal; RadioShack, which was mentioned negatively in Barron's over the weekend, and Shuffle Master Inc., which announced that nearly 60%, or $89.4 million, of its 1.25% convertible senior notes were tendered in an cash tender offer that concluded Friday.

"This is going to be the worst week, I think," a New York-based sellsider said regarding trading volume. "Half the desk is out and the call volume is definitely low."

Ford drops again

Ford's 4.25% convertible bonds due 2036 closed at about 64.625 versus a share price of $4.41 on Monday, compared with trades Friday at 67 versus a share price of $4.50 and on Thursday at 67.5 versus a share price of $4.60.

Recently the paper was at 75 versus a share price of $5.25.

Ford stock (NYSE: F) closed off its lows Monday, but still down 6 cents, or 1.3%, after hitting its lowest level in two decades.

The continued slide came amid higher prices for oil that left crude oil up 52 cents at $115.11 a barrel on the New York Mercantile Exchange.

August domestic auto sales are expected to be weak, although better than July's plunge, which marked a 16-year low, according to J.D. Power & Associates, a research firm, that estimates sales of about 1.21 million vehicles for August.

Fannie Mae lifts to 13

Fannie Mae's 8.75% mandatory preferreds closed at about 12.77 bid, 13.77 offered, versus a share price of $5.19 on Monday, compared to 12.25 versus a share price of $4.85 on Friday.

Shares of the Washington, D.C.-based mortgage company (NYSE: FNM) closed up 19 cents, or 3% at $5.19, after gaining 3% on Friday.

Although financials were generally lower, dragged down by negative sentiment about American International Group Inc. after Credit Suisse predicted a $6.5 billion write down in the third quarter, far above AIG's loss estimate of $2.6 billion, Fannie Mae continued to edge higher.

The move was negligible on a dollar-neutral basis however.

"Fannie got beat up," a West Coast buyside trader said. "You're not making any money hedged and I don't know anybody who would own these things outright."

Nevertheless Fannie and Lehman Brothers Holdings Inc. continue to dominate the financial convertible preferred market, sources said.

Suntech lower, others quiet

It was pretty quiet in solar, according to one sellsider. But Suntech Power Holdings, which trades every couple of days, was changing hands Monday, to the downside.

Suntech Power 3% convertibles closed at about 129, versus a share price of $45.97, compared with opening the day at 130.125 bid, 130.625 offered, versus a share price of $46.10.

The shares (NYSE: STP) closed down 78 cents, or 1.7%.

LDK Solar's American Depositary shares (NYSE: LDK) gained 9% after the company raised 2009 guidance. Also in solar sector news, Trina Solar signed a supplemental to the long-term supply agreement with GCL Silicon Technology Co. Together with the original supply agreement announced in April, GCL Silicon will supply TSL with virgin polysilicon and wafers sufficient to produce about 4,825 megawatts of solar modules over eight years.

Amylin closes near 82

Amylin's 3% convertibles due June 15, 2014 closed at 81 bid, 82 offered, versus a share price of $27.77, which was stronger compared with last week when the stock and convertibles were hit after the FDA raised concerns about the biotech's top-selling Byetta diabetes drug.

On Monday, Leerink Swann resumed coverage of Amylin with an "outperform," and said it expects Amylin to be trading in a valuation range of $46 per share to $48 per share in 2009.

Furthermore Leerink Swann said it believes the pancreatitis concern raised by the FDA last week is overblown. As evidenced by recent FDA Diabetes CV risk and Anti-Convulsant/Suicide advisory panels, the agency is caught in a warn first, ask questions later mentality, the firm said.

It believes that competitive concerns regarding Novo Nordisk's liraglutide are also significantly overblown, and that Amylin's investigational obesity combination therapy (pramlintide/leptin) will increase in visibility in 2009 as phase 2b results are presented which, it believes, will show significant weight loss with minimal side-effects.

Shares of the San Diego-based biopharmaceutical company (Nasdaq: AMLN) closed up $1.19, or 4.5%.

ADM in focus

Semiconductor maker Advanced Micro was indicated higher after the Sunnyvale, Calif.-based company said that it is selling a unit that makes chips for digital televisions to Broadcom Corp. for $192.8 million, as part of a move to focus on its core operations.

"AMD sold a business, and that's interesting to watch in terms of monetizing assets; it could definitely help in terms of credit," a New York-based sellside trader said.

A second sellsider, this one based in Connecticut, said: "The announcement was a headline grabber, but it's not hugely material since it was such a small deal. But it's probably a step in the right direction."

The trader said that he didn't see any AMD trading, with low bids and no offers on the AMD 5.75% convertibles due 2012, which were last at 68, and the AMD 6% convertibles due 2015, which were last at 55.75.

Shares of AMD (NYSE: AMD) closed up 12 cents, or 2%, at $5.93.

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