EMC surges; GM, Ford slump; AMR soars; Intel moves up; General Cable sparks hope for more new deals

By Evan Weinberger

New York, Oct. 1 - EMC Corp. convertibles surged forward Monday, catching up to the stock, which has been upwardly mobile in recent weeks. GM Corp. convertibles, on the other hand, took a slide on the first day of the new quarter, while Ford Motor Co. convertibles fell as the company prepares for its own negotiations with the United Auto Workers.

AMR Corp. convertibles flew into the wild blue yonder on positive economic news. Although they haven't been particularly active, General Cable Corp.'s new convertibles continued to move higher, which analysts said boded well for increased new issues in the coming days and weeks.

Calpine Corp. convertibles traded up as the San Jose, Calif.-based energy utility's bankruptcy case dragged on.

Intel Corp. convertibles were also considerably active and traded up, which was fitting on a day when investors were focused on the equity markets.

Even as UBS announced a pretax loss for the third quarter because of its exposure to subprime mortgages and Citigroup announced that its third-quarter profits would be down about 60% compared to 2006, stocks surged Monday.

Both UBS and Citigroup said they expected the worst of the subprime mess to be over, for them at least, which buoyed sentiment. Oil traded down to $80.24 per barrel of light sweet crude - remember when $50 per barrel was considered staggering? - and the market began buzzing about another rate cut at the end of the month. A bevy of mergers and acquisitions announced Monday also helped buoy spirits.

"There is a better market tone," one analyst said.

The Dow Jones Industrial Average sped past the 14,000 mark, closing at 14,087.55, for a gain of 191.92, or 1.38%.

The Nasdaq gushed to 2,740.99, a pickup of 39.49 points, or 1.46%.

The Standard & Poor's 500 swelled 20.29 points, or 1.33%, for a 1,547.04 close.

Still, a trader was befuddled by the stock market surge. "I am at a loss today for why stocks are up as much as they are," he said. "As an example, not convert related, why are UBS and other large financials up so much, particularly since they've reported such significant losses?"

EMC riding VMWare's coattails

Hopkinton, Mass.-based computer storage supplement producer EMC spun off Palo Alto, Calif.-based computer virtualization developer VMWare Inc. in August. Virtualization optimizes computer performance by separating a computer's operating system from its basic hardware.

VMWare stock hasn't looked back, and on more days than not, parent company EMC has been trading up as well.

Now the convertibles are catching up to the stock, an analyst said.

"The activity has stepped up," he said.

EMC's 1.75% convertible senior notes due Dec. 1, 2011 closed Monday at 142.25 versus a closing stock price of $20.81. They closed Friday at 140.343 versus a stock price of $20.80.

EMC's 1.75% convertible senior notes due Dec. 1, 2013 had an even bigger trading day Monday, closing at 144.125 versus a stock price of $20.81. They finished trading Friday at 137.75 versus a stock price of $20.80.

EMC stock (NYSE: EMC) was up a penny, or 0.05%, on Monday.

GM, Ford down

GM convertibles all traded lower, as did the stock, as the luster from its deal with the UAW faded. According to news reports, GM may be closing two American factories as part of the deal.

GM's 4.5% series A convertible notes due March 11, 2032 (NYSE: GXM) slipped three cents, or 0.14%, to $21 on Monday.

The company's 5.25% series B convertible notes due March 11, 2032 (NYSE: GBM) lost 12 cents, or 0.56%, to close at $21.17.

The Detroit-based auto giant's 6.25% convertible senior debentures due July 15, 2033 (NYSE: GPM) lost 18 cents, or 0.73%, for a $24.31 close.

And GM's 1.5% convertible senior debentures due May 31, 2009 (NYSE: GRM) was the biggest loser of the group, closing at $27.80, a drop of 46 cents, or 1.63%, on Monday.

GM stock (NYSE: GM), lost 65 cents, or 1.77%, to close at $36.05, on Monday.

Dearborn, Mich.-based Ford tumbled Monday as the company prepares for UAW talks slated to open later this week.

Ford's 4.25% convertible senior notes due Dec. 15, 2036 closed at 113.75 versus a closing stock price of $8.23 on Monday. They finished trading Friday at 116.375 versus a closing stock price of $8.49.

Ford stock (NYSE: F) plunged 26 cents, or 3.06%, on Monday.

AMR convertibles flying high

An Icelandic private equity fund's urging last week that AMR, the Fort Worth, Texas-based parent company of American Airlines, spin off its profitable frequent flier program and positive analyst reports managed to beat back a downgrade from Citigroup analysts Monday.

Citigroup downgraded AMR because of concerns over increased prices for jet fuel.

But that was no matter, as the flaps have been set for takeoff at AMR for several trading sessions now.

AMR's 4.5% convertible senior notes due Feb. 15, 2024 closed Monday at 123.5 versus a closing stock price of $23.25. They finished trading Thursday at 119.85 versus a stock price of $22.02.

AMR stock (NYSE: AMR) soared 96 cents, or 4.31%, on Monday.

General Cable could inspire others

General Cable's 1% senior convertible notes due Oct. 15, 2012 opened higher and continued to move in that direction. After closing their first day of trading Sept. 27 at 105.25 versus a closing stock price of $68.19, an analyst quoted the convertibles Monday at 106.5 versus a stock price of $69 on Monday. Despite their attraction, General Cable's convertibles haven't been particularly active, the analyst added.

Stock in the Highland Heights, Ky.-based copper, aluminum and fiber optic wire and cable producer closed Monday up $2.99, or 4.45%, to end at $70.11.

The analyst was hopeful that the success of the General Cable deal would encourage other companies looking to monetize the gains they've seen in the stock market and investor sentiment to look at the convertible option.

"Performance has been very solid for the new issues," he said. "So as much as investors seem to be happy and the companies seem to be happy, that's a good sign for new issues going forward."

Intel active again

Santa Clara, Calif.-based semiconductor producer Intel saw its 2.95% junior subordinated convertible notes due Dec. 15, 2035 close at 105.13 versus a closing stock price of $26.37. They finished trading Friday 103.75 versus a stock price of $25.86.

Intel stock (Nasdaq: INTC) gained 51 cents, or 1.98%, on Monday as the tech sector boiled.

Calpine convertibles up

On Friday, shareholders in troubled energy producer Calpine filed a motion with the U.S. Bankruptcy Court in Manhattan hoping to overturn the approval of Calpine's Chapter 11 re-emergence plan. The shareholders claimed that it was impossible to properly value the company.

But that didn't stop investors in Calpine's convertibles, according to traders.

The company's 7.75% convertible notes due June 1, 2015 closed at 104 versus a stock price of $1.46. They finished trading Friday at around 102 versus a stock price of $1.50.

Calpine's 6% convertible senior unsecured notes due Sept. 30, 2014 closed at 89 versus a stock price of $1.46. They finished Friday at 88 versus a stock price of $1.50.

And Calpine's 4.75% convertible senior unsecured notes due Nov. 15, 2023 closed at 98 versus a stock price of $1.46 after closing Friday at 97 versus a stock price of $1.50.

Calpine stock (Pinks Sheets: CPNLQ) lost 4 cents, or 2.67%, on Monday.

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